Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — AGRICULTURE, FISHERIES AND FOOD

Cereals

Mr. Heathcoat-Amory: asked the Minister of Agriculture, Fisheries and Food what information he has on the size of intervention stocks of cereals held in Britain.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer): I am replying on behalf of my right hon. Friend the Minister, who is at a Council meeting in Brussels.
On 6 December, unsold stocks in intervention stores in Great Britain were 2·1 million tonnes of barley and 3·6 million tonnes of wheat.

Mr. Heathcoat-Amory: Will my right hon. Friend explain how those quantities persist even after a poor harvest? Does he agree that those surplus stocks represent a standing indictment of the way in which the common agricultural policy is still being run and are doing great damage to the image of British farming? Will my right hon. Friend make proposals for reducing those surpluses?

Mr. Gummer: My hon. Friend is right to say that the surplus stocks are far too high and do no good to the image of agriculture. The Commission has presented its proposals and they are being discussed. It is obviously necessary to move the CAP away from being a means of ensuring that we do not have a shortage of food and towards becoming a system that enables us to control what are now surpluses.

Mr. Home Robertson: What is the cost of that storage exercise in a full year? What proportion of cereal stocks have been in store for more than 12 months?

Mr. Gummer: Detailed replies to those questions have been given to the hon. Gentleman and his hon. Friends recently, but the average cost of commercial storage is about £10·22 per tonne per year.

Sir Peter Hordern: Are not cereal farmers already getting far too much subsidy? When will something realistic be done to reduce those subsidies so that consumers pay a reasonable price for their bread?

Mr. Gummer: My hon. Friend is right to say that price must be the basis of the removal of the surpluses; there must be much greater price discipline. However, we must also ensure that there is a sufficient return for the farmer

so that he is able to produce the goods. We have to balance those aspects. If we are to do that, we must ensure that the increasing ability of farmers to grow more on the same acreage results in a lower price per tonne.

Milk Quotas

Dr. Marek: asked the Minister of Agriculture, Fisheries and Food if he will make a further statement on the impact of milk quotas in England and Wales.

Mr. Gummer: At the end of November total wholesale deliveries in England and Wales were about 2·5 per cent. below the Milk Marketing Board's quota projection. If this trend continues, no producer will be liable for levy on milk he supplies to the MMB. I hope that producers will take good note of this and make every effort to maximise uptake of our national quotas.

Dr. Marek: In spite of the temporary underproduction compared with the quota, does the Minister accept that a further 3 per cent. cut across the board throughout the Common Market would be unfair to this country and lead to a further loss of jobs in our creameries? Has the right hon. Gentleman any new proposals for action within the Common Market over the flouting of its rules by countries such as France and Ireland? We religiously stick to what has been agreed.

Mr. Gummer: That is not an accurate statement of what has happened in the rest of the Community. We are discussing a further Community outgoers' scheme. We have the details and the scheme is before the Council. We have to make a decision. We are still talking about a considerable surplus of milk throughout the Community and we must put that right.

Mr. Maclean: Does my right hon. Friend agree that Britain's milk output is as low as is desirable and that the only merit of the 3 per cent. reduction scheme is that it gives some rights to tenants? However, the amounts per cow are too generous and the knock-on effects in beef and other sectors would be disastrous.

Mr. Gummer: We have many real concerns about the proposals and my hon. Friend has mentioned some of his concerns. Clearly, we must argue those proposals out. However, it remains true that the Community does have a surplus of milk. If there is a surplus, the consumer pays through the tax system in the end.

Mr. Strang: Is the Minister aware that most of the dairy industry will be appalled by his answers? When will the Government face up to the disproportionate cuts in production and jobs that have taken place in Britain's dairy industry? Will the Government recognise that the proposed outgoers' scheme is likely to have a disproportionate effect in Britain? Many organisations, including the Dairy Trade Federation, have argued that case. When will the Government start saving jobs in the dairy industry?

Mr. Gummer: It seems that the hon. Gentleman, who represents a party which claims to be an internationalist party, has an odd view of the European Economic Community and the excellent way in which it seeks to solve the problems of agriculture across Europe.

Mr. Colin Shepherd: Will my right hon. Friend reaffirm that if at the end of the milk year British producers have not produced up to quota there will be no question of the national quota being reduced in ensuing years?

Mr. Gummer: My hon. Friend is right. We are concerned to fight for a fair deal for Britain within the Community. In that case, it would obviously be wrong for the quota to be changed because we did not meet it this year for what may well be temporary reasons. However, it is to the advantage of the industry if it does produce up to quota. That is why my right hon. Friend the Minister has drawn that to the industry's notice.

Mr. John: Why do the cheese manufacturers complain that they cannot obtain enough milk to manufacture Cheddar cheese in Britain if, as the hon. Gentleman says, we are running short of our quota?

Mr. Gummer: The hon. Gentleman is right in that there have been complaints from some manufacturers. That is a matter for the Milk Marketing Board, which decides where the milk shall go. It is, in its view, the right way to do it. I am looking into this matter carefully because it would be quite wrong if there were any truth in that allegation.

Mr. Andy Stewart: In 1984 we had a shortfall in milk output targets and we shall also have a shortfall this year. Is that not an indictment? Is it not high time that we had a scheme for transferring quotas between farmers?

Mr. Gummer: My hon. Friend is right to say that the quota system will not work effectively unless there is a reasonable degree of transferability between farmers. Britain has always stood for that. We are fighting hard in the Council to see that we get a sensible transfer scheme.

Cereals

Mr. McQuarrie: asked the Minister of Agriculture, Fisheries and Food if he will propose to the European Economic Community that surplus cereals in intervention should be released for use as feed by farmers who have been adversely affected by the severe weather crisis.

Mr. Gummer: Feed grain in intervention stores in Great Britain is available for sale on the home market at the intervention price. There is little demand at present, as supplies from the open market are cheaper. In addition, measures have already been adopted to make intervention feed wheat from stores in Great Britain available in Northern Ireland.

Mr. McQuarrie: I am grateful to my hon. Friend for that reply. Does he accept that the feed grain which was given to Northern Ireland was given at a reduced price? In view of the information that he conveyed to my hon. Friend the Member for Wells (Mr. Heathcoat-Amory) in an earlier question, does he agree that all farmers who suffer severely from the winter weather crisis should be entitled to the same consideration, whether in Scotland, England or Northern Ireland?

Mr. Gummer: I am sure my hon. Friend will agree that it is reasonable for people to be able to get the feed wheat at least at the same price in various parts of the country. We needed to transfer the wheat to Northern Ireland, and there were special reasons why it had to be done from the rest of the United Kingdom intervention

stores. As for that being part of weather aid, it was considered, and I think in general the agricultural community agrees that it was right to provide that aid in other ways. A certain amount of money was available and we used it in other ways, but we do not believe that in Scotland that would have been the best way to help those worst hit by the bad weather.

Mr. Pike: At the end of November over 29 per cent. of the intervention stock of cereals had been held for over a year. Is it not time that we had action rather than words from the Government to deal with that problem in view of the cost that the Minister gave in reply to an earlier question.

Mr. Gummer: Of course it is time that we stopped over-production of cereals. That is why the Government have fought hard for a system that is based upon price restraint and ensures that in the future we do not produce too much. We have passed through a period in which shortage has been the main problem. We have moved into a period in which we are producing too much, and in those circumstances the whole system of agricultural support must be turned to deal with the new situation of plenty.

Sir Hector Monro: Does my right hon. Friend accept that there has been a warm welcome in Scotland and the north of England for the help that he has been able to give farmers who have been affected by the extremely bad weather? Nevertheless, referring to the question asked by my hon. Friend the Member for Banff and Buchan (Mr. McQuarrie), it would be of additional assistance if my right hon. Friend could give some intervention grain for feed mixtures until the spring. It could be helpful for livestock producers.

Mr. Gummer: I am most grateful to my hon. Friend for making the point about the great welcome that has been given to that package. It has been widely accepted as especially good in view of Government restraint on expenditure. It is unlikely that that package will be extended, although, of course, I shall carefully consider what he said.

Mr. Home Robertson: asked the Minister of Agriculture, Fisheries and Food what acreage of barley and wheat has been sown this winter.

Mr. Gummer: This information will not be available until about March, when the results of the December agricultural census will be published.

Mr. Home Robertson: Is the Minister aware that the substantial areas that have already been planted will add to the cereal mountain next summer? As 29 per cent. of the cereal in intervention stores has been there for more than 12 months, as my hon. Friend the Member for Burnley (Mr. Pike) said, does the Minister recognise the complete inadequacy of his proposals and those of the European Commission to deal with the matter? What is his response to the Labour party's demand for incentives for alternative land uses coupled, if necessary, with a quota scheme for cereals?

Mr. Gummer: It is odd that the hon. Gentleman should suggest that his party has any answer to that problem, because we are now in a world in which technological advance has meant considerable increases in what we can produce. We should start by saying, thank God that we are in the business of dealing with plenty


rather than shortage. The answer must be a Community answer. The Commission has put before us proposals about which we have considerable doubts. We are seeking a price restraint system which will ensure that we do not produce too much. The hon. Gentleman may push his hand like that, but if we have too high a price we shall go on producing too much.

Mr. Ralph Howell: Does my right hon. Friend accept that he must find an answer to this problem? If he will not accept quotas, will he accept production control? Does he agree that every other industry has to accept such control? It is time that the Government recognised that cutting prices will not solve the problem; it will aggravate it. We must alter our stance and have production control in cereals.

Mr. Gummer: My hon. Friend and I have argued about this matter before. I am aware that we do not agree. Until we have a package in which price is the basic way in which we reduce production—

Mr. Howell: No. Nonsense.

Mr. Gummer: —we shall not have a package at all.

Mr. Skinner: Give it to him.

Mr. Gummer: It is all right for Labour Members to say, "Give it to him," to my hon. Friends, but at least my hon. Friends are arguing about something for which they care, which is more than the Opposition do.

Mr. Deakins: What estimates has the Minister made of the impact on British cereal production in the current year of the Commission's cut in cereal prices in that year?

Mr. Gummer: There has been a net cut of about 3·5 per cent. in the price of cereals. We cannot dissociate that from any other element which has affected production this year. I am sure that had the price continued to increase production would have increased even more than it has.

Mr. Douglas Hogg: Does my right hon. Friend accept that many involved in the industry feel that if a prudent price policy is to be effective the cuts must be dramatic? That being so, there is a move within the industry to support acreage quotas. What is his view on that?

Mr. Gummer: I am sure that my hon. Friend is correct and that the industry is moving towards a mixture of price and some kind of quota system. I hope that the industry considers carefully how such a system would be policed and organised and whether it would not, perhaps, result in a kind of sterilisation of the industry which neither he nor any of my other hon. Friends would like.

Food Labelling

Mr. Alton: asked the Minister of Agriculture, Fisheries and Food if he will convene an inquiry to study and recommend methods of standard and informative food labelling.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mrs. Peggy Fenner): My right hon. Friend the Minister is advised on such matters by the Food Advisory Committee, which is composed of independent experts. Its reports, and any proposals for legislation, are subject to consultation with all interested parties.

Mr. Alton: How long will it be before the Ministry implements the findings of its research, carried out in

conjunction with the National Consumer Council, into whether clearer labelling should be provided on canned food, and especially should show levels of added sugar and salt? If that does not happen, would not the Ministry be open to the charge that it is simply pandering and kowtowing to the interests of the canned food manufacturers?

Mrs. Fenner: No. My right hon. Friend made it very clear that we accepted the report of COMA. We have been holding consultations to find the most practical way to implement it. The hon. Gentleman was right to say that we also carried out a consumer survey to assess the needs of consumers in relation to labelling. We are considering all the comments made and hope to bring forward proposals shortly.

Mr. Coombs: Is my hon. Friend aware that 60 per cent. of those responsible for food shopping who were interviewed in a recent market research survey said that they considered the health aspect of food when deciding what to buy? Against that background, and also because many supermarkets, including Tesco, are now introducing this food labelelling, does she recognise that there is a need for the utmost dispatch in introducing labelling proposals?

Mrs. Fenner: I agree with my hon. Friend, which is why we are currently considering proposals for legislation that will provide a statutory requirement to indicate on labels the fat content in food. We are also looking at a format for nutrition labelling. We are aware that although COMA did not recommend that, a great deal of interest is being displayed both by consumers and manufacturers. If nutrition labelling is taken up, we want it to be in a form that will help rather than confuse the consumer.

Mr. Ashley: Is the Minister aware that even when additives are considered generally to be safe, some individuals suffer adverse reactions to them? Are those people not entitled to protection like everyone else? Therefore, should not all main additives be shown on the label?

Mrs. Fenner: Indeed, and the Food Act 1984 requires that. The lead-in time means that by 1 July 1986 all additives must be shown on labels, whether in number, description, or both.
There is no proof that there is a connection between allergenicity and food additives. My Department has commissioned research into connections between adverse reactions and food and food additives.

Sir Geoffrey Johnson Smith: Does my hon. Friend agree that it might be a sensible step, which would benefit housewives and other shoppers, if the major food stores explained the meaning of the E number on labels?

Mrs. Fenner: My Ministry produces a book which, if we were not giving it away, would be counted as its best seller. It is entitled "Look at the Label" and sets out all the E numbers. We are considering what other systems of educational information should be provided.

Mr. John: I hope the Minister accepts that people do not want to go shopping with a ready reckoner to discover what additives are in food. Will she confirm that when regulations are made they will not be two-tier—one, the statutory labelling of fat content, and the other an optional requirement to show added sugar, salt and fibre?

Mrs. Fenner: COMA recommended statutory labelling of fat content. We have responded to that and proposals will be put before the House. COMA did not recommend statutory nutrition labelling. If we introduced that, we might have some difficulty within the EEC because of distortion of trade.

Mr. Gregory: Will my hon. Friend confirm that we are fully behind the EEC Commission's proposal to include in the revision of the 1973 chocolate directive a vegetable content of up to 5 per cent.? Will she bear in mind that for almost half a century the United Kingdom confectionery trade has included that content and ensure that we do not follow the French and Belgian Members of the European Assembly in the spirit of the fruit-and-nut case in going along that line, which would reduce jobs, reduce choice and reduce United Kingdom confectionery in the EEC market?

Mrs. Fenner: Yes. I give my hon. Friend that assurance.

Cereals

Mr. Deakins: asked the Minister of Agriculture, Fisheries and Food when the European Economic Community Council will next consider the level of cereal prices for the current year; and if he will make a statement.

Mr. Gummer: The Council took no decisions earlier this year on cereals prices for the current marketing year, although discussions continue, and the Commission has now laid before the Council further proposals.

Mr. Deakins: When the Council comes to consider cereal prices for next year, will it take as its base figure the level of cereal prices for the current year as determined by the Council following the German veto, or the level of cereal prices as determined by the Commission?

Mr. Gummer: The hon. Gentleman knows that the proposals before the Council will have to be considered by all the members of the Council. The Government have made it clear that we welcome the fall of 3·5 per cent. in real terms in the price given to cereals and that we intend to have that and to pull the price down still further.

Mr. Harris: Is my right hon. Friend aware of two pieces of evidence given to the Select Committee on Agriculture? The first piece is that the amount of grain in intervention stores is virtually bound to increase still further. The second piece is that farms have now reached the ridiculous point of growing purely for intervention rather than for the market. Although my right hon. Friend is right to put his faith in price restraint, if it can be achieved, the fact is that that will not be achieved because of the view of our partners in Europe. Will he be prepared for what I reckon will be the inevitable consequence of the introduction of quotas so that we do not get them introduced overnight?

Mr. Gummer: I am sure my hon. Friend is right in saying that we should be prepared for a package that will include a range of measures. That is always true and it would be wrong to think otherwise, but unless the Government stand firmly by the fact that we need to have a major part of the package based upon price discipline, price discipline will not be achieved, and it is essential for success.

Mr. Geraint Howells: Will the Minister agree with me and others that if we lower the price of grain by 5 per cent., production will increase by 10 per cent. within the next two years?

Mr. Gummer: I do not agree with that.

Mr. Bill Walker: My right hon. Friend will be aware that we had a drought last year and that this year has been particularly wet. Does he recommend to farmers in Scotland that in future they should go into warehousing? It is obvious that there is more money in that than in growing cereals or keeping livestock.

Mr. Gummer: No, Sir, I do not so recommend.

Mr. Strang: Will the Government oppose root and branch the proposal for a co-responsibility levy for cereals?

Mr. Gummer: For the many reasons that we have put forward previously we do not like the concept of the co-responsibility levy. We do not enter these discussions on the basis that we oppose root and branch any of the proposals put forward. We shall consider, discuss and argue them and try to come to a solution that fits the whole of Europe, for the Conservative party is an internationalist party.

Mr. Budgen: May I remind my right hon. Friend that when there were proposals to reduce the production of milk, our Government said that the quotas would be bureaucratic and impracticable? Is there any guarantee that when there are proposals in Europe to reduce the production of cereals the Government will not once again go along with a solution which they know to be wrong and against the interests of the British people?

Mr. Gummer: We do not believe that quotas are the way to solve the problem. We have said that clearly. We believe that the way to solve the problem is by price restraint. We shall continue to press that. That seems to be a solution that will be good for Britain and for the rest of the European Community, to which we belong.

Mr. Home Robertson: As the Minister keeps saying that price restraint is the right way to control surpluses, will he give an estimate of the percentage price cut that would be necessary to bring supply into line with demand? What would be the effect of such a cut on smaller producers? Will the right hon. Gentleman accept that such a solution would be intolerable? We need a comprehensive package, which must include quotas.

Mr. Gummer: The hon. Gentleman always asks for a comprehensive package without indicating what would be in it. Whatever the results we come to, and whatever the period during which cuts are obtained, it is necessary for cereal prices to come down.

Agricultural Land

Mr. Chapman: asked the Minister of Agriculture, Fisheries and Food what is his latest estimate of the annual loss of agricultural land to other forms of development.

Mrs. Fenner: For England, the average annual loss of agricultural land to other forms of development for the five-year period ending June 1984 is estimated to be 13,000 hectares, or 32,000 acres.

Mr. Chapman: The answer to that identical question last year was 35,000 acres. Will my hon. Friend confirm


that there is a welcome trend downwards in loss of agricultural land to other developments? Will she confirm that the proportion of agricultural land last year to building and other urban developments this year—about half—is also about the same proportion as last year?

Mrs. Fenner: I confirm that the net reduction in the rate of loss of agricultural land in recent years confirms that trend. In the preceding five-year period ending 1979, the average annual loss was approximately 21,000 hectares, or 52,000 acres. About 10,000 hectares of that were known to be for urban and industrial use. During the last five-year period, about 4,000 hectares, or 10,000 acres, per annum have been lost to urban development and industrial use.

Sir Dudley Smith: I draw my hon. Friend's attention to the fact that Warwickshire county council is hell bent on taking a large slice of superior agricultural land to develop a technology park when non-agricultural land is available for the purpose. Will my hon. Friend and her colleagues consult the Department of the Environment to ensure that such a difficulty does not arise in future?

Mrs. Fenner: I shall have to look into that matter. We are consulted at all stages in the preparation of structure and local plans and on all planning applications affecting more than 4 hectares of agricultural land that do not conform to an agreed development plan.

Ewes

Mr. Colin Shepherd: asked the Minister of Agriculture, Fisheries and Food if he will make a statement on the future arrangements for the export of ewes to France.

Mr. Gummer: Under a European Commission regulation which came into effect on 9 December, we are required to charge clawback—at the rate of 50 per cent. of that applicable to lambs—on ewemeat exported to France. Though we remain opposed to this approach, we have introduced the necessary arrangements. The French have now removed the import restrictions they were operating on our exports of ewemeat.

Mr. Shepherd: Does my right hon. Friend agree that the concept of imposing what is, in effect, a tax on any form of export of agricultural produce from the United Kingdom to the Community is unacceptable? Will my right hon. Friend ensure that the practice is never allowed to stick and that it is never accepted in default? Will he take all the steps at his command to ensure that this kind of penalty is not accepted in future?

Mr. Gummer: My hon. Friend is absolutely right in saying that it is unacceptable to claw back that which one has given in the first place. That does not make sense and we have opposed it wholly. It is also wholly unacceptable and against any kind of international order when a country decides to take the law into its own hands and act in a way that we would consider to be entirely illegal.

Mr. Livsey: What will the right hon. Gentleman do to remove claw back by next spring, when a great number of cull ewes will come on to the market? It is essential to remove this claw back by then.

Mr. Gummer: I said clearly in answering the last question that we believe this to be entirely wrong. We have

obeyed the law because it is our business to be law-abiding. We shall do everything in our power to change what is obviously nonsense.

Sir Hector Monro: Will my right hon. Friend accept that his endeavours on behalf of sheep farmers are highly commendable, but as this matter has been dragging on since last September we must try to get it resolved as soon as possible because it is having a very serious impact on the sheepmeat market between this country and the Continent?

Mr. Gummer: My hon. Friend is absolutely right. I believe that it is necessary to stand up in the Community for the rights of British fanners, and it is not proper that their reasonable export demands should be stopped, first, illegally and, secondly, by a system that is clearly nonsense.

Mr. John: Will the Minister confirm the amount of disruption caused by French interference and the loss therefrom to the British farmer? Will he also confirm that the effect of the 50 per cent. levy will be a reduction in the variable premium by 30p a kilo?

Mr. Gummer: I think that the hon. Gentleman is right to say that there has been considerable disruption as a result of the action by the French. That is why we opposed it so strongly, apart from the principle concerned. At the same time, obviously it would be for the trade to take any course of action which it felt was available to it. As to the hon. Gentleman's assertions, I will give him a detailed table of what seem to me to be the direct effects.

Southall Horse Market

Mr. Greenway: asked the Minister of Agriculture, Fisheries and Food if he has any plans to visit the Southall horse market; and if he will make a statement.

Mrs. Fenner: I have no plans at present to visit the market. My veterinary staff attend the market and are able to monitor and encourage compliance with the voluntary code of practice on horse markets.

Mr. Greenway: Does my hon. Friend accept that the voluntary code of practice does not seem to work at Southall, and that inspectors of the Horses and Ponies Protection Association, I and many other people regard the state of affairs there as wholly cruel? Horses and ponies are abused by being left unfed and unwatered for long periods of time. They are not properly presented for sale and they are not properly loaded into boxes when they are removed from Southall. Is it not now time to do something to stop such serious animal abuse?

Mrs. Fenner: There have been considerable improvements of facilities and conditions generally in that market, as my hon. Friend was good enough to acknowledge when he last raised the matter on 16 May. He will know that the Farm Animal Welfare Council is studying the whole question of horses' welfare in markets, and we believe that it is right to await its recommendations for any further action.

Milk Co-responsibility Levy

Mr. Knox: asked the Minister of Agriculture, Fisheries and Food if he will make a statement about the Government's attitude towards the milk co-responsibility levy.

Mr. Gummer: Funds raised by the co-responsibility levy make an important contribution to the cost of supporting the milk sector, particularly to the cost of disposal of the milk surplus.

Mr. Knox: Does my right hon. Friend think there is any prospect of getting rid of this levy in the forthcoming negotiations, as it has achieved little or nothing, and has merely added to the cost of British dairy farming?

Mr. Gummer: It is clearly important that this is taken into account in discussing the price of milk. I understand my hon. Friend's concern, because what started as a levy to do something totally different has now been overtaken by the quota system.

Common Agricultural Policy

Mr. Colvin: asked the Minister of Agriculture, Fisheries and Food if he will make a statement on the European Commission Green Paper on "Reform of the Common Agricultural Policy."

Mr. Gummer: The Government welcomed the Green Paper and the stress it laid on the importance of price policy in securing a better market balance. We now look to the Commission to make specific proposals adequate to deal with the problems identified.

Mr. Colvin: As a farmer, I congratulate my right hon. Friend on his continued belief in the price mechanism as the best way of controlling surplus output. Has he seen the package of proposals on cereals produced by the Commission since its Green Paper, which in my view discriminates against United Kingdom cereal producers? What changes to those proposals has he in mind to ensure greater equality?

Mr. Gummer: A large number of proposals are obviously not acceptable to us because they discriminate against the pattern of farming in this country and the nature of the cereals that we produce. There is a whole series of items that we would like to see changed. Moreover, we do not believe that the package is adequate to solve the problem, and that has to be done.

Mr. Tony Lloyd: Will the Minister accept that the Green Paper ought to have contained some reference to the problem of food additives, given the real dangers that some people claim are caused to consumers, and particularly to those working in the food sector, who may be exposed to very high levels of food additives?

Mr. Speaker: Order. That question is rather wide of the mark.

Mr. Gummer: If the hon. Gentleman had been present earlier he would have heard our particular discussion on food additives, which do not come under this question.

Mr. Jackson: Will my right hon. Friend confirm that if there were to be quotas in the cereal sector, it would still be necessary to maintain sharp price discipline?

Mr. Gummer: My hon. Friend is right, and only Britain is determined to see that price restraints play a major part in any package of measures. If we do not continue to press for that, we shall have a package that does not work.

Outgoers' Scheme

Mr. Cockeram: asked the Minister of Agriculture, Fisheries and Food what representations he has received from interested organisations on European Economic Community proposals to set up a Community-wide outgoers' scheme.

Mr. Gummer: I have received representations on the proposed Community outgoers' scheme from hon. Members, interested organisations, and individual farmers. These have reflected a number of concerns, including the position of tenant farmers and landlords. The proposals are still being discussed at official level and are unlikely to come to the Council of Ministers before January.

Mr. Cockeram: Is my right hon. Friend aware that agriculture accepts the need for an outgoers' scheme for the milk industry, but nevertheless there is a legitimate complaint from the landlord and the tenant, each of whom has invested his resources in developing the industry to its present state?

Mr. Gummer: An outgoers' scheme should recognise that in most cases both the landlord and the tenant have contributed to the ability of the land to produce milk. Therefore, it would be wrong to ignore either side in the outgoers' scheme, and we shall ensure that that does not happen.

Mr. John: Does the right hon. Gentleman recognise that if there is a voluntary outgoers' scheme on all agricultural products, that may lead to the withdrawal of the most efficient farmers in some counties and the perpetuation of high-cost inefficient farmers in others?

Mr. Gummer: The hon. Gentleman is right, and we are concerned about this factor. To achieve our purpose we shall look carefully at the scheme and seek to ensure that it is fair as between countries and farmers and as between tenants and landlords.

Falkland Islands

Dr. Godman: asked the Minister of Agriculture, Fisheries and Food what percentage of the total fish catch in a 200-mile zone around the Falkland Islands was made by British distant water vessels in the last year.

Mr. Gummer: I am not aware of any catches made by British distant water vessels in the last year in the waters around the Falklands Islands.

Dr. Godman: Is it not astounding that these rich fishing grounds should be subjected to such ruthless exploitation by the fishing vessels of foreign nations? Should we not be moving towards a more effective system of harvesting, with the direct involvement of British fishing interests and those of the Falklands'?

Mr. Gummer: I am sure the hon. Gentleman knows that British fishing interests have every right to take part in fishing in this area if they so wish. Setting up a different regime there is a matter for my right hon. and learned Friend the Foreign and Commonwealth Secretary.

Mr. McQuarrie: Does my right hon. Friend agree that it is ridiculous that Britain has become the laughing-stock of the Community when £50 million worth of fish are being picked up within the 200-mile limit of the


Falklands? When do the Government propose to do something about the report by Dr. Beddington of Imperial College?

Mr. Gummer: The general response to the Beddington report is based on advice given by the Minstry of Agriculture, Fisheries and Food to the Foreign Office, in whose hands this matter continues to be. As to the first question, I am not aware of any British fishing interest that has been prevented from fishing around the Falklands. If it wishes so to do, it can.

Mr. Randall: Does the right hon. Gentleman agree that an early agreement on the best way to exploit and manage this rich fishery is important to Britain and the fishing industry, especially if one takes into account the rumoured cuts in quotas, about which we expect to hear later this afternoon?

Mr. Gummer: The hon. Gentleman need not be too concerned about that. We are pleased that the Food and Agriculture Organisation has launched its study. When we have the details we shall be able to make a sensible basis for the future fishery potential in this area.

Salmon

Sir Hector Monro: asked the Minister of Agriculture, Fisheries and Food what is his estimate of the probable increase in salmon entering British rivers following his announcement on drift netting off the English coast.

Mr. Gummer: The measures which I announced on 7 November will tighten the rules under which the English north-east coast salmon drift net fishery operates. They should produce a significant reduction in the catch of that fishery. Because various natural causes influence the level from season to season, I cannot give a specific forecast of the extent of the increase in salmon entering British rivers.

Sir Hector Monro: Does my right hon. Friend accept that the resolution of the problem of drift netting off the north-east coast of England is crucial to the survival of salmon in the United Kingdom? Will he watch the matter closely and take further action if there are no significant improvements in salmon stocks in Scotland?

Mr. Gummer: I undertake to do that, but I remind my hon. Friend that the arrangements which we have made this year will restrict fishing there, in that there will be no weekend fishing, no night fishing, and licences will not be transferable. Major steps have been taken, but we shall continue to examine the matter.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. Spencer: asked the Prime Minister if she will list her official engagements for Thursday 19 December.

The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having further meetings later today.

Mr. Spencer: In view of the announcement by the board of Westland Helicopters that it intends to enter into

an agreement with Sikorsky-Fiat, will my right hon. Friend confirm that the position of the Government is as set out in the statement of my right hon. and learned Friend the Secretary of State for Trade and Industry on Monday?

The Prime Minister: Yes, Sir. The future of Westland is a matter for the company to decide. The company's decision is a matter of commercial judgment for its directors and shareholders. That was the position set out by my right hon. and learned Friend, and that was the position reaffirmed by the Cabinet this morning.

Mr. Kinnock: It is something of a change for this matter to go before the Cabinet, or so it appears. Given the patently obvious views stated publicly by the Secretary of State for Defence and the Select Committee on Defence, does the Prime Minister really believe that the subjective preferences of a company are an adequate basis on which to determine important national defence interests?

The Prime Minister: Westland is a private sector public limited company. Its future is a matter for the company to decide, and the company's decision is a matter of commercial judgment for its directors and, ultimately, its shareholders. That is the position, and it was reaffirmed by the Cabinet this morning.

Mr. Kinnock: The Prime Minister said that the company was responsible to its shareholders. Is she not, as Prime Minister, responsible to the nation and for the proper welfare of the nation? Why is she not taking that into proper account, as the Secretary of State for Defence clearly believes she should? When the strategic, considered judgment of the Secretary of State for Defence is contrary to the view of a private company, why is she backing the company, not him?

The Prime Minister: I have informed the House of the position of the Cabinet this morning. The position of the Cabinet is the position of the whole Government.

Mr. Churchill: Has my right hon. Friend heard of a farce that is playing on the South Bank entitled "Robin Ratepayer and his Merry Ratepayers"? Does my right hon. Friend agree that it is entirely appropriate that the leader of the Greater London council should play the star role in this production, for he and the other Marxist city henchmen of the Leader of the Opposition have been robbing ratepayers for years? Will she accept that the ratepayers of the metropolitan counties will be delighted when she rings down the curtain on this over-expensive production next March?

The Prime Minister: I am grateful to my hon. Friend. I agree with his broad analysis. I believe that the GLC has taken in far more rates than it needs. There should therefore be a goodly amount to be returned to the district councils when the GLC is extinguished.

Mr. Tony Banks: At least there is still a sense of humour on the South Bank. Does the Prime Minister care that the Christmas present to 6,000 loyal GLC staff this Christmas will be their redundancy notices? In view of the misery and unhappiness that the right hon. Lady is causing to these people and to the 3·5 million people who are on the dole, does she think that she deserves a happy Christmas this year?

The Prime Minister: The decision to abolish the GLC was taken by Parliament. I did not hear the hon. Gentleman mention whether Labour councils will be


prepared to take on those extra people. The hon. Gentleman ought to remember that there were two years under a Labour Government when all pensioners received no Christmas bonus.

Sir Fergus Montgomery: During her busy day, will my right hon. Friend find time to consult the relevant Ministers about the disgraceful way in which the chief constable of Greater Manchester is being treated? Is she aware that yesterday the Labour party used its built-in majority on the police committee to censure this man for merely telling the truth? Is this not yet another example of the Fascist Left in this country pillorying decent public servants who refuse to kowtow to them?

The Prime Minister: My hon. Friend makes his point very cogently. I am sure he will understand that I cannot comment while that investigation is in progress.

Mr. Madden: asked the Prime Minister if she will list her official engagements for Thursday 19 December.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Madden: Will the Prime Minister confirm that the city of Bradford has been earmarked to receive extra resources for urban renewal? Will she also confirm that the key to urban renewal lies in providing more money for new council housing and more money for home improvement grants? Finally, will she confirm that any new money will be given to the local councils concerned and not to a new range of unelected and unaccountable quangos?

The Prime Minister: I do not agree with the hon. Gentleman that the key to urban renewal lies solely with urban housing. The amount of money that has been spent on urban housing and the way in which it has been spent are two of the factors that have led to many of the problems.

Sir John Biggs-Davison: When Ulster is told that it may be rid of the Intergovernmental Conference when it accepts devolution, is legislative devolution and devolved government meant by devolution, or what is meant? Why do a Unionist Government pursue policies that tend to detach Northern Ireland from Great Britain?

The Prime Minister: I cannot accept the latter part of my hon. Friend's question. As he knows, I believe that Union will certainly continue under the Agreement, so long as there is a majority and the majority expresses that wish. Devolved government has to be in accordance with the agreement, which is one that is acceptable to the two traditions in Northern Ireland. As my hon. Friend is aware, there was, in legislation about the Assembly, a possible means of securing much more decision-taking through the Assembly, through the two communities, than is at present the case.

Dr. Owen: In view of the widespread disquiet in the country and in the City about the situation affecting Lloyd's, and in the light of what has happened to its chief executive, how do the Government justify not placing Lloyd's under the new market investing board? Will the Prime Minister consider this issue again and also the need for a full-time chairman of considerable independence and stature to supervise this aspect of the City's behaviour, which many people feel the present legislation is inadequate to cover?

The Prime Minister: I should have thought that the right hon. Gentleman would be aware that Lloyd's had its own regulatory system and Act of Parliament, the Lloyd's Act 1982. It is too early to pass judgment on the effectiveness of the new regime. We believe that events at Lloyd's to which publicity had been given originated before the Act was passed, but we are keeping a close watch on events there and if it becomes necessary to take action or to legislate we shall not hesitate to do so.

Sir Peter Hordern: Will my right hon. Friend make it clear to the chairman of ICI and others who are calling for a lower exchange rate that if industry insists on raising wages so that its products become uncompetitive, the Government will not bail them out by reducing the exchange rate?

The Prime Minister: Yes, I shall make that very clear. That way does not lie increased and improved competitiveness. The only way is to have efficiency in the company, in costs, in design and in quality. No company should look to the exchange rate to secure competitiveness which it cannot itself produce.

Mr. Dobson: asked the Prime Minister if she will list her official engagements for Thursday 19 December.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Dobson: The Prime Minister told the House on Tuesday that there had to be losers in the social security review. Will she now say how many there will be, who they will be and how much they will lose?

The Prime Minister: If we were to bring in what the Labour party has plans for—[Interruption.]—the burden on the working population would be colossal. We reckon that national insurance contributions for people on average earnings would rise by £9 a week, so that about 20 million people would lose under Labour's plans.

Mr. Teddy Taylor: asked the Prime Minister if she will list her official engagements for Thursday 19 December.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Taylor: If the Sikorsky deal goes through, as I hope it does, will the Prime Minister ensure that there will be no question of my right hon. Friend the Secretary of State for Defence discriminating against the Westland company or any of its excellent products?
Will she convey to my right hon. Friend the Secretary of State for the Environment the thanks of Southend borough council for the most favourable rate support grant settlement—[Interruption.]—which its efficiency deserves?

The Prime Minister: In respect of both parts of my hon. Friend's supplementary question I indicated the Cabinet's decision this morning, and I wish to make it clear that major procurement decisions are a matter for the collective decision of the Government as a whole. I thank my hon. Friend for what he said about the rate support grant. Any authority that spends efficiently and keeps its budget in line with assessed need gets its full grant, and its ratepayers may be very grateful.

Mr. Gould: asked the Prime Minister if she will list her official engagements for Thursday 19 December.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Gould: Will the Prime Minister now answer the question that was put by my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson)? How many losers will there be under the social security review, who will they be and how much will they lose?

The Prime Minister: This Government have protected those most in need—(HON. MEMBERS: "Answer."]—and have increased, over and above prices, the retirement pension, supplementary benefit rates and benefits for the sick and the disabled—[Interruption.] They have all risen by considerably more than prices. The social security review must be taken as a whole. It is fair both to beneficiaries and the working population. As I said earlier, under arrangements that have been proposed by the Opposition, about 20 million of the working population would stand to lose through national insurance contribution increases.

Sir Geoffrey Finsberg: Does my right hon. Friend agree that whatever decision may ultimately be taken by the shareholders of Westland, it has at least flushed out the Labour party Front Bench into appearing to support the defence of this country?

The Prime Minister: The Labour party is supporting NATO and the defence of Britain. That is worth while, and a change of policy for some.

Mr. John Morris: In view of the recent track record of the Department of Health and Social Security and the Department of Transport in the courts, will the Prime Minister say whether the Attorney-General's Department was consulted? To save taxpayers' money in future, will she co-ordinate the activities of the legal officers of those Departments and the Attorney-General's office?

The Prime Minister: The right hon. and learned Gentleman is correct. Yes, the Government have been before the courts and have abided by the decisions of the courts. That is what the rule of law is all about.

Mr. Kinnock: On a point of order, Mr. Speaker. I wish to raise this matter while the Prime Minister is still present. During Prime Minister's Question Time we heard that the Cabinet had taken a decision regarding Westlands. Since this is a vital matter, may we have a further statement from the Government? Can the Prime Minister tell us whether such a statement will be made by the Secretary of State for Trade and Industry, or by the Secretary of State for Defence?

Mr. Speaker: I cannot answer that.

Mr. Dykes: On a point of order, Mr. Speaker. My point arises directly from Question Time, when you called hon. Members for agriculture questions, shortly before the change of subject. The old custom was that you would be notified if hon. Members were not to be present. I know that it is just before Christmas, but, in one go, an unprecedented list of 10 hon. Members were not present. Do you have any observations on that?

Mr. Speaker: Only that that is the present custom also.

Mr. Madden: On a point of order Mr. Speaker. You will have heard, with the rest of us, the Prime Minister's dismissive view of the importance of housing. Does that attitude explain why the Secretary of State is today issuing by written answer the details of the housing investment programme rather than coming to the Dispatch Box to make a statement?

Mr. Speaker: That is a continuation of Question Time. It is not a matter for me.

Cervical Cancer (Screening)

Mr. Frank Dobson: (by private notice) asked the Secretary of State for Social Services if he will make a statement on the current state of the cervical cancer screening programme.

The Minister for Health (Mr. Barney Hayhoe): The Government's plans for further improvements to health authority arrangements for cervical cancer screening were announced by my right hon. and learned Friend the then Minister of Health on 29 April 1985. As I told the hon. Member for Holborn and St. Pancras (Mr. Dobson), health authorities are being asked to give priority to improving their cervical cancer screening programme. I expect arrangements to be made with family practitioner committees to implement computerised call and recall systems with the necessary laboratory service to meet the related demand and to avoid backlog. We are consulting the medical profession on better follow-up arrangements. Those measures should help to increase the number of women at risk who are screened, to provide for the processing of cervical smears taken from them and the necessary follow up.
The number of deaths from cervical cancer has fallen by about 13 per cent. during the past decade. Provisional 1984 figures suggest a further 3 per cent. fall. More can be achieved and to do that we need more women, especially those who have never been screened, to join the programme. The most effective way to achieve that is by personal invitations from women's general practitioners. Computerised systems will aid the identification of the women who are due for screening. That is the right way forward.

Mr. Dobson: Does the Minister expect anyone to be satisfied with that statement? Does he recall that on 18 March the right hon. and learned Member for Rushcliffe (Mr. Clarke), the former Minister for Health, told the House that the Government were soon to issue a questionnaire asking all health authorities for full details of local screening services. Yesterday, nine months and 1,500 deaths later, the Minister could not tell me when the survey was sent out, when the replies were received or whether it would be published. I ask him those questions again today.
Perhaps I should ask whether the questionnaire has been sent out at all. In the statement on 29 April to which the Minister has referred, the right hon. and learned Member for Rushcliffe told the House that the Government intended to improve the effectiveness of laboratory facilities for processing cervical smears and would be discussing with health authorities how best to achieve that.
On 9 December, the Minister said that he could not list the authorities which had asked clinics or doctors to suspend taking smears because of backlogs in laboratories. On 11 December he said that he did not know the average time taken to process a smear through a laboratory. Also on 11 December, rather astonishingly, the Minister told me that he would not expect health authorities to express concern to him about delays in processing cervical smears. I wondered what had happened to the discussions announced with much publicity in April. Yesterday, the Minister told me that no specific discussions on that issue are now proposed.
The statements made in March and April were intended to convince people, in particular women, that something was being done to improve on the earlier shambles. Last night's "Newsnight Special" and the recent parliamentary answers show that nothing much is happening. So in addition to the specific questions that I have already asked I now demand the answer to the fundamental question: when will the Government commit themselves to finding the resources to introduce and operate computerised call and recall schemes to cover every woman at risk in Britain as recommended to them by their expert advisers in 1981? Nothing less than that will satisfy the women of Britain.

Mr. Hayhoe: As I have explained, district health authorities are being asked to give priority to those programmes. More computerised call and recall systems are coming on stream the whole time. At the moment, 50 per cent. of the family practitioner committees have the computer capability to operate the call and recall system. As I have said, district health authorities are under instruction from the centre to give priority to that work.
I made it clear yesterday that the questionnaire to which the hon. Gentleman referred was a checklist which was intended to enable health authorities to review their cervical screening programmes and that was issued on 29 April. We asked to have results back by 14 June. As I explained to the hon. Gentleman, the results and answers have come back and the information that was received was not designed for summary and publication but to help the centre in its work in that area.
The health authorities are being asked to give, and are giving, priority to providing the appropriate back-up so as to remove the backlog that regrettably exists in some areas and also to improve facilities for the future.

Mr. Robert McCrindle: Is it not a fact that the only effective method of tracing women in high risk categories is through the computerised systems operated by district health authorities? If that is so, does my right hon. Friend not share with me some concern that the rate of progress between one district health authority and another shows a considerable variation? Does he have any plans to intervene to try to expedite the progress among those health authorities who seem to have slipped far behind in their programme? Is he satisfied that the financing of the computerised systems and the financial division between his Department and district health authorities is satisfactory and leads most efficiently to the operation of the system to which I suspect most hon. Members would wish to subscribe?

Mr. Hayhoe: On the matter of finance, my hon. Friend will know that the health authorities have, on average, 6·7 per cent. more cash plus the resources made available by cost improvement programmes. That is £650 million extra cash, plus a considerable sum, certainly exceeding £150 million a year, of cost improvement. Out of those extra resources cervical cancer screening is one of the priority claims.
I share the concern expressed by my hon. Friend about the difference in the provision of service for one part of the country and another. I assure him that is one of the matters dealt with in the reviews that my colleagues and I carry out. On the matter of health authorities, I believe that we shall be making considerable progress in implementing the call and recall system which, I agree with my hon. Friend, is the best way to deal with the


problem. Regular screening every five years is highly desirable. Personal invitation from the women's general practitioner is much more likely to be effective than a national advertising campaign, which I know is advocated in other areas.

Mrs. Renée Short: I am sure that the Minister will appreciate that, if the necessary cervical cancer screening programme is intensified, it will inevitably produce more patients who need treatment by radiology, radiotherapy or surgery. How does the Minister expect those additional patients to be treated when hospital resources are being reduced all over the country and most of the London teaching hospitals, which are in the front line of research in this area, are having to close their beds? Will he look at that issue and find out what resources the London teaching hospitals need?

Mr. Hayhoe: I accept the hon. Lady's comment about the increase of patients coming forward for treatment if the coverage of the screening programme becomes more widespread and effective. I hope that it will lead to more patients coming forward for early treatment which requires fewer resources than if the condition is not found early enough by the screening programme that we are now trying to encourage women to use more extensively.
I repudiate the hon. Lady's suggestion that resources are being cut. Under this Government, the resources made available for the Health Service have increased in real terms by 20 per cent. There is no way in which that can be described as a cut.

Mr. Peter Viggers: Does my right hon. Friend agree that, contrary to the statement made by the hon. Lady, the pressure on the National Health Service is not caused by cuts in Government programmes but by the advances in medical science that make so much more possible for the population? Within that growing demand, does he recognise the need in the allied field of screening for breast cancer in women where there is an increasing awareness of the risk that women run and a need for the availability of screening that can save so many lives?

Mr. Hayhoe: I agree with my hon. Friend's remark about the pressures on the Health Service. As we all know, the demand for health care is practically unlimited, yet the resources that can be made available to it must, of their nature, be limited. We are seeking to have an increase in

real terms in resources going to the Health Service and an increasing cost improvement programme so that more resources are available for patient care. The statistics show that that is being fulfilled as we compare one year with another. I agree with my hon. Friend about the need for screening and preventive action across the whole spectrum of medicine.

Mr. David Alton: In view of what the Minister has said about resources, will he tell the House how much it costs per person to carry out a cervical screening test? Will he also tell the House whether he has read the recent criticisms of the accuracy of the test so that he can give an assurance about how accurate it really is?

Mr. Hayhoe: I do not know the precise cost of the test, but I shall write to the hon. Gentleman. I know that it is relatively small. It is not the cost of the test that is at issue. We are seeking to persuade the women concerned, particularly the priority group, the over-35s, to come forward to have the test. As I said, by far the best way to do that is for the invitation to come from the GP. That is why the computerised system of call and recall operated by the family practitioner committees is the best and most effective way of achieving that result.

Mrs. Ann Clwyd: The Minister plainly has greater faith in the efficiency of GPs' surgeries than the rest of us have. Can he say in which Welsh area health authority areas backlogs exist?
I note that the Secretary of State for Wales is not here this afternoon. As the Minister will be aware, the Health Service in Wales is less democratic than it is in England or Scotland because there are no regional health authorities to plan overall health services. Can he give us detailed answers of where in Wales the backlog exists? Will he support the well woman clinics and give the necessary resources so that we can have more of them. That would help if he genuinely wants to track down cervical cancer in women.

Mr. Hayhoe: I agree with the hon. Lady that GPs play a crucial role in the call and recall programme for those tests. GPs' co-operation and involvement in those programmes is of the highest importance. I am not competent to reply about the position in Wales, but I shall draw the attention of my right hon. Friend the Secretary of State for Wales to the point made by the hon. Lady.

Business of the House

Mr. Neil Kinnock: Will the Leader of the House state the business for the first week after the Christmas Adjournment?

The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): Yes, Sir. The business for the first week after the Christmas Adjournment will be as follows:

MONDAY 13 JANUARY—Second Reading of the Public Order Bill.

There will be a debate on a motion on seat belt regulations.

TUESDAY 14 JANUARY—Second Reading of the Financial Services Bill.

There will be a debate on a motion to take note of EC document 7283/85 relating to vehicle gaseous emissions.

WEDNESDAY 15 JANUARY—Opposition Day (Third Allotted day). There will be a debate on an Opposition motion, the subject for debate to be announced.

Motion on the Statutory Sick Pay Up-rating Order.

THURSDAY 16 JANUARY—Until about seven o'clock there will be a debate on a motion to take note of EC documents relating to European fisheries policy. Details of the documents concerned will be given in the Official Report.

There will be a debate on the draft Hong Kong Nationality Order in Council (Cmnd. 9367) on a motion for the Adjournment of the House.

Afterwards, motions on the Northern Ireland (Emergency Provisions) Act 1978 (Continuance) (No. 3) Order and the Northern Ireland (Emergency Provisions) Act 1978 (Amendment) Order.

FRIDAY 17 JANUARY—Private Members' Bills.

[Debate on Tuesday 14 December

Relevant Documents

(a) 7283/85
Vehicle gaseous emissions

Relevant Report of European Legislation Committee
(a) HC 5-xxx (1984–85) paragraph 6

Debate on Thursday 16 January

Relevant Documents

(b) 9284/85
Fishing controls


(c) 8662/85
Allocation of certain fishing possibilities to Spain


(d) 10047/85
Fish Guide Prices 1986


(e) 10015/84
Reduction of Spanish fishing capacity


(f) Unnumbered
Fisheries: Total Allowable Catches (TACs) and quotas 1986


(g) Unnumbered
Fisheries: amended TACs and quotas 1986


(h) Unnumbered
Fisheries agreement with Norway 1986

Relevant Report of European Legislation Committee

(b) HC 5-xxxi (1984–85) paragraph 2
(c) HC 5-xxx (1984–85) paragraph 12
(d) HC 21–i (1985–86) paragraph 3
(e) HC 5-vii (1984–85) paragraph 1

(f) HC 21–v (1985–86) paragraph 2
(g) HC 21–v (1985–86) paragraph 3
(h) HC 21–v (1985–86) paragraph 4]

Mr. Kinnock: I am grateful to the right hon. Gentleman. As the Prime Minister did not find herself able to respond to the point of order that I raised earlier—

Mr. Nicholas Soames: It was not a point of order.

Mr. Kinnock: You, Mr. Speaker, will be the judge of that. [HON. MEMBERS: "He was."] In view of the decision apparently taken by today's Cabinet, will the right hon. Gentleman arrange for a statement to be made to the House before we rise tomorrow by either the Secretary of State for Trade and Industry or the Secretary of State for Defence, or both, about the Government's current attitude towards the Westland deal and whether the Government are willing to accept the clear obligations of national interest which arise in that case?
On Tuesday, the Prime Minister said that the Roskill report on fraud trials, which contains 117 recommendations, was in the Government's possession. Will it be published in good time for the debate on the Financial Services Bill on 14 January? Why can it not be published now, or at least during the recess? It is clearly in a form which would enable it to be printed and published for the general consideration of hon. Members.
Is the right hon. Gentleman aware that the Secretary of State for Scotland has today written to the stewards at Gartcosh, effectively tearing up the Select Committee report and glibly accepting British Steel's rather unconvincing view that the future of Ravenscraig is unaffected by the closure of Gartcosh? Does not the Secretary of State for Scotland owe the House an explanation of the way in which he is abandoning—[AN HON. MEMBER: "Cynically."]—indeed, cynically abandoning—steel workers and steel communities in Scotland? Can the right hon. Gentleman at least arrange for a statement to be made to the House tomorrow, before we rise for the Christmas recess?
In view of the Government's continuing failure to undertake any productive initiative in settling the teachers' pay dispute, will the right hon. Gentleman agree to a debate, in Government time, early in the new Session so that the House can ask the Secretary of State to account for his hapless attitude towards the profession, towards parents and, most of all, towards the pupils who are suffering as a result of the Government's intransigence and their lack of interest in the education system?
Now that the White Paper on the reform of social security has been published, when will legislation to implement those proposals be introduced? Are there any draft proposals to phase out heating additions for claimants, especially the elderly, on supplementary benefit?

Mr. Biffen: I shall respond to the right hon. Gentleman's questions in the sequence in which they were presented.
First, on the right hon. Gentleman's remarks about the Prime Minister confirming the statement made earlier this week on Westland by my right hon. Friend the Secretary of State for Trade and Industry, I can confirm that that statement was confirmed at a Cabinet meeting this morning. I do not think that there is anything devastatingly


novel about such a revelation, but I shall have the matter considered further through the usual channels to see whether it is to feature in our business before we retire for the Christmas recess. I say in all sincerity to the right hon. Gentleman—[Interruption.] It gets better as we go along. I shall do my utmost to ensure that the House has the advantage of possessing the Roskill report before the Second Reading of the Financial Services Bill. It is a fairly formidable document, but I do not think that it is in quite the advanced stage suggested in the right hon. Gentleman's question. As to the right hon. Gentleman's interpretation of my right hon. Friend's remarks, I think that that covers the full spectrum, but of course I shall look into the matter.
On the question of Gartcosh, I must confess that I was not entirely able to recognise from the right hon. Gentleman's comments the position of and the role being played by my right hon. Friend th Secretary of State for Scotland. However, I know that in this, as in all matters, one should proceed charitably. I shall look into the matter about the Select Committee report and, through the usual channels, consider whether an early statement is appropriate.
I am sure that we all recognise the very serious position that is developing through the protracted industrial action being undertaken by the teaching profession. Perhaps we could look at the question of a debate through the usual channels.
I assure the right hon. Gentleman that legislation will be introduced setting out the proposals of the White Paper on the social services reasonably soon after we reassemble following the Christmas recess.

Sir Dudley Smith: My right hon. Friend will be aware that there is considerable interest in the Shops Bill and the Animals (Scientific Procedures) Bill. I appreciate that they are now in their final stages in another place. Will he give some rough indication of when they are likely to arrive here for their Second Reading—sooner or later?

Mr. Biffen: There are some lively competitors for our time and affection in the period from mid-January onwards. I cannot answer my hon. Friend in the specific terms that he desires, but if he presses the matter when we return perhaps I can then give him a more forthcoming reply.

Mr. Alfred Morris: The Leader of the House knows from last night's debate on the motion for the Christmas Adjournment that there is very deep concern in the north-west about the future control and operation of Manchester international airport. The right hon. Gentleman agreed to communicate urgently to the Secretary of State for Transport the call for an oral statement today about the airport's future. How did the right hon. Gentleman get on? Would it not be grossly contemptuous of the House for the airport's future to be decided without any opportunity for hon. Members to question the Government's decision?

Mr. Biffen: I undertook, as the right hon. Gentleman says, to communicate to my right hon. Friend the sense of the first of the debates on the Adjournment motion. I take note of his remarks about the importance of the House taking a view before the decision is taken. I shall convey that observation to my right hon. Friend the Secretary of State for Transport.

Mr. Roger Sims: Has my right hon. Friend noticed the increasing pressure from many reputable organisations and from all quarters of the House for the establishment of family courts? Can my right hon. Friend provide an opportunity to debate the matter early in the new year?

Mr. Biffen: I shall certainly take note of my hon. Friend's observation. I cannot be very forthcoming about guaranteeing such time, although I recognise the importance of the issue.

Mr. Michael Foot: May I take the right hon. Gentleman back to his first reply on whether there should be a statement tomorrow on Westland? The right hon. Gentleman has great mollifying qualities but he must understand that an intolerable state of affairs exists. Is the Secretary of State for Defence holding a press conference at this moment to repudiate what has been said by a Minister in the House? Will the right hon. Gentleman give us on his own account, and without the wisdom of the usual channels, an absolute assurance that there will be a statement on the matter tomorrow?

Mr. Biffen: The right hon. Gentleman, for so many years of his distinguished career, was part of the usual channels. He knows that there is no wisdom superior to that of the usual channels.

Sir Fergus Montgomery: I should like to draw my right hon. Friend's attention to early-day motion No. 277, which raises the matter of the chief constable of Greater Manchester.
[That this House views with grave disquiet the outrageous treatment of the Chief Constable of Greater Manchester by the politically-motivated action of the Greater Manchester Police Committee in seeking to censure him for exercising his right of free speech.]
May I impress upon my right hon. Friend that any inquiry into that matter is unlikely to report before Greater Manchester county goes out of existence? Such an inquiry would be a total waste of ratepayers' money and there are some who feel that it would be a cynical way in which to promote the chairman of the Manchester police committee, Mrs. Gabriella Cox, in her search for a safe Labour seat on Manchester city council. In view of the great public concern in the area and the anger that has been aroused by the treatment of the chief constable, can there be an early debate on the matter?

Mr. Biffen: I shall certainly draw the attention of my right hon. Friend the Home Secretary to the arguments advanced by my hon. Friend.

Mr. Jack Ashley: Will the Leader of the House not agree that it is both deplorable and regrettable that the family of a child that was deafened and brain-damaged in a medical accident should have to spend nine years fighting in a court of law for compensation for that child? In Britain we need a no-fault compensation scheme, as they have in other countries. Can we have a debate on that matter as soon as possible?

Mr. Biffen: I join at once with the right hon. Gentleman in acknowledging the poignancy of the case that he quoted and I shall consider his request. cannot guarantee that Government time will be available for such a debate in the new year, but doubtless there are other opportunities available to the right hon. Gentleman.

Mr. Fred Silvester: May I urge my right hon. Friend not to let his natural good will and Christmas spirit lead him to pay too much attention to the siren voice of the right hon. Member for Manchester, Wythenshawe (Mr. Morris), as the matter of Manchester airport is now properly in the hands of the districts of Greater Manchester council. It would be most improper to have any statement or debate while decisions are being made.

Mr. Biffen: I had the advantage of listening to the problems as they were rehearsed last night by the right hon. Member for Manchester, Wythenshawe (Mr. Morris). When listening to him, I thought that there was possibly a degree of controversy. The remarks which I have addressed to the right hon. Gentleman must stand.

Mr. James Hamilton: The Leader of the House is aware that serious redundancies in the British Steel Corporation in my constituency are imminent, and he will recall that I raised the matter with him last week. Bearing in mind that the right hon. Gentleman has been asked that a statement should be made by the Secretary of State for Scotland on the situation which has arisen over Gartcosh and Ravenscraig, and that the Secretary of State has conveniently washed his hands of responsibility, is it not incumbent on the Secretary of State to make a statement tomorrow against the background of chaos in the Scottish steel industry?

Mr. Biffen: I think that the hon. Gentleman will have heard me say that it is a matter which could be pursued through the usual channels, and by those remarks I stand. The Department of Trade and Industry will be available for questions on Wednesday 15 January and the hon. Gentleman will have a chance to make some of his points then.

Mr. James Hill: Is my right hon. Friend aware that, after the signing of the research programme by my right hon. Friend the Secretary of State for Defence and Caspar Weinberger a short time ago, we are fully committed to involving ourselves in the research programme? Is there not a case to be made for a debate on this subject? Practically every other Parliament in Eurpope has had a debate on the strategic defence initiative and many of the myths need to be cleared from this subject.

Mr. Biffen: I join my hon. Friend in underlining the significance of the decision on SDI. I cannot offer the prospect of an early debate in Government time after we return, but doubtless my hon. Friend will have other opportunities that he can pursue.

Mr. David Alton: The Leader of the House has given an assurance over the past three weeks that he will try to provide time to debate the creation of an Anglo-Irish parliamentary tier. How long will it be before we have a chance to have that debate?

Mr. Biffen: No, I cannot. This is a matter which will require a fairly thoughtful approach. Perhaps some discussions can proceed initially through the usual channels. I shall be in touch with the hon. Gentleman.

Mr. David Sumberg: May I refer my right hon. Friend again to the question of my hon. Friend the Member for Altrincham and Sale (Sir F. Montgomery) about the disgraceful attempt by the Left-wing loonies of

Greater Manchester to attack the chief constable of that area? Will my right hon. Friend confirm that the chief constable has a fine record of service to the police force? Is it not appropriate that the House should have an opportunity of debating the matter at a very early date?

Mr. Biffen: I think that the record and integrity of the chief constable is so self-evident that it hardly needs debating in the Chamber.

Mr. D. N. Campbell-Savours: Does the Leader of the House recall that it was October when the Select Committee on Privileges published its report on the confidentiality of deliberations of Select Committees of the House? Does he not think that it is about time that we had a debate on this issue? Is he not aware of the most recent complaints that have been made concerning the Select Committee on the Environment? Is not a debate required urgently?

Mr. Biffen: I am not sure that there is an urgency which is comparable with the pressures which exist for many other subjects to be debated. As I was the Chairman of the Select Committee which produced the report, I have all the pride of paternity, but that does not mean that I think it has to exclude other items that should be debated. [Interruption.] I think that the right hon. Gentleman was about the only Privy Councillor who was not a member of the Select Committee. Therefore, I think that his remark is wholly appropriate.

Mr. Bill Walker: My right hon. Friend will be aware of the concern that is felt in Scotland over the outcome of the inquiry of the Select Committee on Scottish Affairs into the proposed closure of Gartcosh. Is he aware of the final sentence in the Committee's report, which asks the Secretary of State to review the situation in the light of the evidence presented to the Committee? Anyone who cares to study the evidence—there is a substantial amount of it—will realise that my right hon. Friend the Secretary of State for Scotland came up clearly with the correct answer in view of the evidence which the Select Committee accepted.

Mr. Biffen: I am most grateful to have my hon. Friend's interpretation of the findings of the departmental Select Committee. Probably, this last week before Christmas is the only occasion on which he might get away with it. I shall leave it at that.

Mr. John Home Robertson: Is the Leader of the House aware of the strength of feeling in Scotland about the threat to the future of its integrated steel industry? Is he aware especially of the massive public support for the resistance of the work force at Gartcosh? Now that even the Select Committee on Scottish Affairs, with its distorted representation, has come out in favour of the retention of Gartcosh, can we have an assurance that there will be a statement from the Secretary of State for Scotland?

Mr. Biffen: Obviously, the hon. Gentleman is anxious to place upon the record a rather different interpretation of the Select Committee's report from that of my hon. Friend the Member for Tayside, North (Mr. Walker). I take account of the serious nature of the problem for the Scottish economy and the deep feelings that are engaged by it. I have said that the matter could be considered through the usual channels, and I think that I must stand by that.

Mr. Peter Bruinvels: Will my right hon. Friend consider giving the House an opportunity to debate prisons and prison buildings? Is he aware that there are 46,900 people in prison and that, although there is some overcrowding, the Government, through the Home Office, have come up with the idea of super-prisons whereby Milton Keynes and Doncaster prisoners will be given the opportunity to have their own individual separate rooms with en suite bathrooms? Does he agree with me that prisons should deter and that they should not be regarded as luxury holiday homes?

Mr. Biffen: I suspect that my hon. Friend, like myself, had the advantage of listening to the "Today" programme. I think that that programme brought home the fact that the issue which he has raised is highly topical. I must confess that I can hold out no immediate prospect of a debate upon it in Government time. I recommend that my hon. Friend seeks to pursue the matter through the various other opportunities that are available to a Back-Bench Member.

Mr. Roland Boyes: Has the Leader of the House had an opportunity to note early-day motion 262, which I and a number of my hon. Friends bring to the attention of the House?
[That this House regrets that the United States of America now has congressional authority to develop new chemical weapons in 1987; notes that this approval is dependent upon the agreement of North Atlantic Treaty Organisation allies; calls upon the Secretary of State for Defence to withhold his agreement and demands that he encourages his counterparts in other North Atlantic Treaty Organisation countries to do likewise.]
The motion brings to the attention of the House that the President of the United States of America has Congressional authority to develop a new range of chemical weapons commencing in 1987. This is dependent upon the support of the NATO allies. Will the right hon. Gentleman make time available to debate this important issue in view of the widespread public abhorrence of these obscene weapons?

Mr. Biffen: I shall, of course, draw the attention of my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs to the point that the hon. Gentleman makes, which I know is one of considerable general interest.

Mr. Spencer Batiste: Is my right hon. Friend aware that the attacks on the chief constable of Manchester are but symptomatic of attacks elsewhere by Left-wing authorities which are seeking to undermine the independence of the police and public confidence in them? Will he take an opportunity at an early stage for the House to assert its full support for the police and their operational independence in future?

Mr. Biffen: I acknowledge what my hon. Friend has said and share his deep regard for the work and integrity of our police forces. I do not think that I can add to the answers which I have already given on this subject.

Mr. Dennis Skinner: Did the Leader of the House notice that, when he read out the business for the week when we return after Christmas, no members of the Social Democratic party were present? Bearing in mind the difficulties of the Christmas post and the sending of the Whip to SDP members, would it not be a good idea if the

right hon. Gentleman made a special effort to ensure that they know of the business that will be before the House when we return?
Will the right hon. Gentleman ensure also that the hon. Member for Stockton, South (Mr. Wrigglesworth), who has recently taken on a paid parliamentary consultancy with Barclays Bank—the bank operates in South Africa, which Social Democrats regard as a repugnant regime—is made aware that the House will be debating the Second Reading of the Financial Services Bill on Tuesday 14 January, and that he can come and explain what he is doing? When the leader of the Liberal party, the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel), was talking about Members taking other jobs and moonlighting, his mate in the SDP, the hon. Member for Stockton, South, was picking up several thousand pounds for a moonlighting job for Barclays. We would like to hear explanations from the right hon. Gentleman and the hon. Gentleman.

Mr. Biffen: The hon. Member for Bolsover (Mr. Skinner) is in grave danger of becoming a matinée idol. He has made some shrewd and constructive observations about the gap between the smug rhetoric of the leaders of the Liberal party and the Social Democratic party and the rather lacklustre performance in the Division during the debate on Members' interests. I understand that many of my hon. Friends do not know whether those right hon. Gentlemen were in the television studios or on the ballroom floor, but, in either place, that is no way to lead a great political campaign.

Mr. Bruce Milian: Returning to the question of Gartcosh, has the Leader of the House seen the letter that the Secretary of State for Scotland wrote to the convener of the shop stewards, which was written on the same day as the Select Committee on Scottish Affairs reported and which repudiated that report? Since when have Select Committee reports been dealt with in that way by the Government? Is this not a disgraceful way in which to behave?
Is the right hon. Gentleman aware that the Secretary of State for Scotland has said over recent months that, if he were presented with evidence, he would carefully consider it? Was not the behaviour of the Secretary of State yesterday a demonstration that that was a complete sham? The right hon. Gentleman has not considered the evidence. He has gone against the overwhelming evidence to the Select Committee which was brought out in its endorsement of the evidence in its recommendations. It is no good the Leader of the House saying that we can wait until 15 January to ask questions of the Secretary of State for Trade and Industry. Decisions may have been taken by that time. Will the Leader of the House give an absolute assurance that we shall have a statement and a debate before the Government take any final decision on Gartcosh? There is overwhelming support in Scotland for the retention of Gartcosh. We want it to be retained. We do not want anything to happen by default through Government decisions taken while the House is in recess.

Mr. Biffen: In my experience, my right hon. Friend the Secretary of State for Scotland is a courteous and most fair-minded man. I cannot conceive that he fits the description that is sought to be applied to him. This matter can be pursued through the usual channels.

Mr. George Robertson: Will the right hon. Gentleman reflect on the Prime Minister's words during Prime Minister's questions this afternoon when she said that the three years between the passing of the Lloyd's Bill and the scandals of today were not long enough to judge the effectiveness of that legislation? Is the right hon. Gentleman aware that this contrasts with the fact that yesterday at 3·30 pm the all-party Select Committee on Scottish Affairs concluded that there was a link between the future of Gartcosh and Ravenscraig; yet, on the same day, the Secretary of State for Scotland chose to pre-empt the evidence and the Select Committee's conclusions by rejecting them in advance?
Does the right hon. Gentleman recognise that this will be seen in Scotland as a betrayal of everything that the Secretary of State has said about considering all the evidence on its merits? Will he ensure that the British Steel Corporation makes no irreversible decision before the House has had a chance to debate the conclusions of a very fair-minded report from the Select Committee?

Mr. Biffen: The observations of my right hon. Friend the Prime Minister on the Lloyd's legislation were grounded in monumental common sense. I note what the hon. Gentleman has said about the Gartcosh closure and the Select Committee's report. I can only repeat what I have said in respect of the matter being considered through the usual channels.

Mr. Greville Janner: Is the right hon. Gentleman aware of the return to the United Kingdom of Mr. Bob Astles, who was the right-hand man of that odious murderer Idi Amin? He has been allowed—apparently without much question—to return to this country. Is it correct that he has applied for renewal of his British citizenship? If so, will the right hon. Gentleman assure the House that that will not be granted without the House having the opportunity to debate the request? Many hon. Members on both sides of the House would regard Mr. Astles as a most unwelcome member of our citizenry.

Mr. Biffen: There is little that I can say in my capacity as Leader of the House about Mr. Bob Astles. I note the hon. and learned Gentleman's observations and will ensure that his remarks are put to my right hon. Friend the Home Secretary.

Mr. Barry Henderson: Is my right hon. Friend aware that the otherwise excellent report by the Select Committee on Scottish Affairs was marred by its concluding paragraph, which did not flow from an objective view of the evidence? Will my right hon. Friend make arrangements whereby hon. Members may be encouraged to read not only the report but the evidence to the Committee? If that were done, we would not hear the kind of remarks made by the right hon. Member for Glasgow, Govan (Mr. Milian) and the hon. Member for Hamilton (Mr. Robertson).

Mr. Biffen: I well understand my hon. Friend's point. It puts many of the Opposition's remarks into context. Clearly, this is a matter of great concern in Scotland. It is a matter of controversy. It can be considered through the usual channels.

Mr. Tom Clarke: May I thank the Leader of the House for the kind words he uttered—

Mr. Campbell-Savours: The hon. Member for Fife, North-East (Mr. Henderson) has breached privilege.

Mr. Henderson: No—it has been published.

Mr. Clarke: I do not often get the chance to speak, and I would be grateful if my hon. Friend the Member for Workington (Mr. Campbell-Savours) would be quiet.
I thank the Leader of the House for the kind words he uttered to my constituents last week. Notwithstanding that, they are still confused. They cannot understand why a Select Committee could present, with an overwhelming majority, a recommendation to the House and why that recommendation has not been debated. In spite of that, the Secretary of State for Scotland has issued a letter. Is it not normal practice for a Select Committee to receive a formal response from the Secretary of State? Does that letter not therefore pre-empt the rights of the House? Is this not a serious matter?

Mr. Biffen: In no sense does it pre-empt the rights of the House. I must ask the hon. Gentleman to observe just what are the relationships between Select Committees and the Executive. The matter can of course be considered through the usual channels. I made that remark very early on in response to the Leader of the Opposition.

Mr. Max Madden: Will the right hon. Gentleman turn up the Daily Telegraph of 3 December in which he can find an article written by Blake Baker headlined
MPs ready to greet dubious immigrants
which is stacked with information compiled by the immigration service management and members of the private office of the Minister of State, Home Office? Will the right hon. Gentleman note that I have tabled a question to the Home Secretary asking him to refer that article to the Director of Public Prosecutions with a view to ascertaining whether it breaches the Official Secrets Act?
Will the right hon. Gentleman note that it is now six weeks since the Minister of State, Home Office, made serious allegations against a number of hon. Members with regard to representations to the Home Office? Will he note also that the Home Secretary is now talking about preparing a code of practice for Members making such representations? Is it not high time that we had an opportunity for a debate so that this important matter could be discussed by all hon. Members of all parties who are concerned about the issue behind these serious allegations?

Mr. Biffen: I note that a question to my right hon. Friend the Home Secretary has been tabled, and doubtless the hon. Gentleman will receive the answer in due course. It would be improper for me to try to anticipate that answer. I have noted what the hon. Gentleman has said. I cannot hold out the hope of an early debate, but the hon. Gentleman will have seen that a written answer was tabled on this topic earlier this week.

Mr. David Winnick: As the Secretary of State for Defence has contradicted everything that was said on Monday about Westland by the Secretary of State for Trade and Industry, and as the Secretary of State for Defence has argued his case publicly at every opportunity, including yesterday to the Select Committee on Defence, will the Leader of the House recognise the importance of a further statement on Westland being made before we break for the recess? As the only opportunity is tomorrow, will the right hon. Gentleman give serious consideration to the requests by hon. Members, including myself, for such a statement to be made?

Mr. Biffen: The hon. Gentleman portrays a total caricature of the remarks made by my right hon. Friend the Secretary of State for Defence on this matter and the collective statement on behalf of the Government by my right hon. and learned Friend the Secretary of State for Trade and Industry and by the Prime Minister. But, of course, he will have noted how I responded to the Leader of the Opposition, and he would not expect me to respond in a more forthcoming manner to him than I would to his leader.

Fisheries Council

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer): With permission, Mr. Speaker, I should like to make a statement about the Fisheries Council which I attended with my right hon. Friend the Minister of Agriculture, Fisheries and Food and my right hon. Friend the Minister of State, Scottish Office, on 16 and 17 December.
I have already given the House my right hon. Friend's apologies for his absence. He is attending a Council meeting in Brussels.
I am delighted to be able to report that, for the second year in succession, the Council was able to reach political agreement before the start of the year on a package of total allowable catches and quotas for the Ten in 1986. This was subject only to a waiting reserve by Ireland. As last year, we agreed to the package on a temporary basis pending a debate in this House, which I hope can be arranged shortly after the Christmas recess.
The agreement covers all the stocks for which TACs and quotas are currently set and we were able to achieve a package which is highly satisfactory for the United Kingdom. The TACs had to be based for the joint stocks on the agreement which the European Commission had reached with Norway and I was critical of some aspects of that agreement, notably on herring. But in general, the package of TACs, quotas and third country arrangements which we negotiated offers a particularly attractive range of fishing opportunities for United Kingdom fishermen. On North sea whitefish stocks, the package contains significant increases in our haddock and saithe quotas and improvements in the quotas originally proposed for cod, plaice and sole. We successfully resisted Danish pressure for continuation of the special allocation of cod to Denmark outside the TAC. On North sea pelagic species, we obtained from the agreed proposals and some further bilateral exchanges an increase of nearly one third in our herring quotas in the important northern and central North sea areas and a very useful increased mackerel quota in the North sea.
In the case of the western pelagic stocks, the original quotas for mackerel and herring were increased, but in the outcome were still, as they should be in view of the scientific advice, below last year's levels. Sole and plaice stocks are of particular importance in the south-west. I am glad to say that, as a result of the package negotiated and the associated quota exchanges, we were able to secure increases of about one third in the availability of sole in area VII and about 10 per cent. for plaice. We also obtained an immediate increase in our current quota for plaice in the Bristol channel which will allow the fishery to be reopened for the rest of the year.
This adds up to a very satisfactory settlement indeed, but it was all overshadowed by the danger of the Commission proposal for an increase in the Norway pout by-catch derogation which could have done immense damage to our industry and to conservation. We have fought against this for the past six months and I am relieved and delighted to report that this proposal was excluded from the package and the Commission has now withdrawn it.
Lastly, the Council also agreed a series of improvements to the regulation on the control of fishing


activities which should provide for better enforcement of logbooks and landing declarations as well as better control of transhipments to receiving vessels. This is further evidence of the importance which all Fisheries Ministers are now attaching to more effective control of the fisheries.
I hope that the House will have an opportunity to debate this settlement very shortly after the Christmas recess. I have no hesitation in commending this package to the House.

Mr. Stuart Randall: May I first thank the Minister for coming to the House and giving his statement on the Fisheries Council. We on the Opposition Benches are pleased that an agreement on TACs and on quotas has been reached at the beginning of the year. We also accept the notion to which the Minister referred in his statement, that determination of the size of quotas and TACs should be based on scientific advice. We accept, therefore, that from time to time restrictions for genuine conservation purposes are necessary.
Is the Minister not aware that many British people, especially those who work in the fishing industry, regard the way in which other EEC countries have over-fished certain stocks as grotesque and totally unacceptable to British fishermen? Will the Minister give some assurances that these unfair practices will be discontinued? We believe it is vital to discuss new quotas, especially limitations, in combination with measures on protection, inspection and enforcement.
I believe that the Minister's statement was inadequate as far as protection and enforcement is concerned. I invite the Minister to attempt to convince the House that we shall not continue the same old routine of the other EEC countries ripping off our fishing industry while the Government are unable to deliver any satisfactory solution. Is he aware that many people in the industry believe that the Community and the British Government have failed to keep their policy on enforcement intact? The Opposition are disappointed that the Minister has been unable to say anything substantial on the matter at this important time of announcing the 1986 quotas.
Will the Minister tell the House specifically whether the illegal over-fishing by the Dutch has been stamped out? Will he give the House and the British fishing industry a categoric assurance that this illegal over-fishing has been stopped? If it has not been stopped, will the Minister tell the House exactly what he intends to do about it?
Will the Minister also tell us how we can be sure that British fishermen will not lose out to other EEC fishermen in 1986 when it can be argued that member states do not have the political will to carry out in full their responsibilities for applying and enforcing Community law? Is it not time that the Government did more to protect the British fishing industry?
The Minister will be aware, I am sure, that certain parts of the industry that operate in the North sea fishery catch appreciably less haddock and are much more reliant on the cod quota. Does he not realise that these new cod quotas will produce considerable hardship for fishermen in these areas? What does the Minister have to say to the people in these areas because it is a matter of great concern?
Will the Minister accept that much tougher protection, enforcement and inspection procedures are vital if the

Community conservation policy is to remain intact? Does he not agree that the accession of Spain and Portugal will increase pressures on our existing enforcement resources? Will he further accept that this is not the time to reduce the function of our fisheries protection service by phasing out the Nimrods? Would it not have been preferable to establish better enforcement before taking this step? What steps is the Minister taking to compensate British industry for the cuts in some quotas by taking advantage on a Community basis of the agreements that Spain and Portugal already have with other countries outside the EEC? What scope is there for providing new fishing opportunities for British fishermen in this way?
Finally, is the Minister aware that the British fishing industry is very angry at the way in which the EEC Commission has agreed to give Norway, which is not a member of the EEC, 40 per cent. of the North sea herring stocks? Does he not agree that this is very unfair, especially at a time when British fishermen are having to cope with cuts in certain quotas? Can this not be thought of as a sell-out to Norway?

Mr. Gummer: It was a little less than generous of the hon. Gentleman to pose so many questions without starting off by admitting that this is a remarkably good result in the negotiations for the United Kingdom. I was also surprised that he did not say that we actually won the battle over Norway pout, something the Opposition always believed we could not do and would not stand by. He went on to complain about protection when, indeed, I said in the statement that at yet another meeting the Council has moved forward on the protection and control arrangements of the common fisheries policy.
The British Government have got the Inspectorate of Inspectors, have extended that inspectorate so that it will have 21 soon and have pressed upon other nations the need for control. We can look with satisfaction at the way in which, for example, the Dutch Government have so tightened up their policies that the Dutch fishermen are busy chasing their Government to complain about the strictness of the new regulations. The story of Britain's campaign for a better system of control in the European Community fisheries policies is a remarkably good story for the Government and one on which the hon. Gentleman should congratulate us.
It is not fair to suggest that we have not been concerned about enforcement. I can give the House the news, which will interest the hon. Member for Truro (Mr. Penhaligon), that from 1 January, in the south-western approaches, there will be two fishery protection vessels and some extra Nimrod runs, increasing direct control of our protection. We have computerised the new monthly list of the Spanish boats that come to the area and we shall be able to check automatically and rapidly on any boat that comes in.
We now have a common arrangement with the Irish and French Governments to see that the protection arrangement is enforced together, so that we can give each other information about the movements of Spanish boats within the area. I am sure that that will help the House if it has any concern about the control of this part of the common fisheries policy.
As to the accession of Spain and Portugal, there will be further discussions of the arrangement for the fishing policy for the Twelve. One of the issues that will be discussed will be the results of the special arrangements that come about because of previous agreements between


Spain and such countries as Mauritania and Morocco. Those are very much in the hands of the Commission, which is looking at how best such arrangements can be applied.
No one can be more concerned about enforcement than we. I mentioned the measures that the British Government have taken and the strong measures taken by the Danish Government. A number of other Governments have taken measures to ensure that their fishermen abide by the common fisheries policy. If they do not, we shall continue the policy of pressing hard to make the policy work, a course of action that has been successful up to now.

Mr. Barry Henderson: Is my right hon. Friend aware that of the many things that are helpful to fishermen in the statement, the one that Scottish fishermen will most particularly welcome is that concerning the pout box, which is helpful to many Scottish fishermen in the North sea? What can my right hon. Friend do to stiffen the back of the European Community in its negotiations with Norway, which are of great importance to fishermen on the east coast of Scotland? There is a growing feeling that, although we are getting satisfactory arrangements within the EC on fishing matters, there is some weakness in the Community in facing up to getting satisfactory arrangements with the Norwegians, although there is a wide basis on which there could be a more satisfactory agreement with Norway.

Mr. Gummer: I am sure that my hon. Friend puts the case properly when he suggests that the agreement with Norway is not as good as it could or should have been. It is easy to criticise negotiations that are not carried out by ourselves, but the agreement should have been better. We have managed, within the Community agreement and the swaps that we have arranged, to ensure that our fishermen have a proper amount of herring to go after. However, there is no doubt that they feel hard done by because the Norwegians appear to have had a better deal than was necessary, and we believe that the deal should not have been carried out in the way that it was. We have made this position clear and have been joined in that by other countries. I assure my hon. Friend that I shall do everything that I can to make sure that in future negotiations those points are borne strongly in mind.

Mr. David Penhaligon: In the past 10 or 11 years I have listened to various Ministers of various Governments use various descriptions, all of which included something along the lines of, "the importance that all fishery Ministers are now attaching to more effective control of fisheries". However, throughout that time, with the single exception of herring, the position on most types of fish has become worse.
Although on first examination this statement seems a little more acceptable, does the Minister agree that, if factory boats from Russia, Bulgaria and Egypt are still allowed to go to the east coast of Scotland, as they were allowed to go the coast of Cornwall, the mackerel of Scotland will be as rare as it is in my part of the world, and the stock will inevitable be annihilated? Is not the answer in the long term European negotiations to the effect that the people who rely on the fishing from their own ports are made primarily responsible for the conservation measures of their area? Does he agree that the pressure

from those who wish to maintain a long-term income for their community and family is the pressure most likely to solve this problem?

Mr. Gummer: There have been major improvements in the control service in the past couple of years, and the hon. Gentleman will agree that there have been encouraging actions from a number of Governments, so much so that a number of Governments are under considerable pressure from fishing fleets because of the toughness of the action that they have taken. We are pleased about that because it shows that they are acting as we intend them to act and as they are now bound to act because of the inspectorate and the way in which the system works.
In Holland, Denmark and other countries there has been a major improvement. During this negotiation, we have added to what we did last time and the time before and insisted on further ways to ensure that the Community imposes its will, particularly in conservation. We have been tough in supporting conservation measures and as a result have ensured the removal, for example, of the Commission's proposal of the Norway pout bycatch, entirely because of the conservation reason that we put forward. It meant that, although we started off isolated as the only country that did not want an extension of the derogation, we ended up by having the support of a large number of other countries which saw our conservation case. This is one sector of the European Community in which there have been significant advances in the way in which the Community can operate successfully.

Mr. Austin Mitchell: The right hon. Gentleman is full of praise for his Department's cleverness, but he omitted to mention the disastrous fact that the allocation of North sea cod is 17 per cent. down on our catch this year and 30 per cent. down on our quota this year. This has serious, if not disastrous, consequences for Grimsby, which is a cod port whose vessels are overwhelmingly suited for catching cod. If the reduction is inevitable, what proposals does the Minister have for the Grimsby fishermen who are struggling, are not making a return adequate to provide new investment and will face horrendous financial difficulties if the catches go down? The Department allocated £16·9 million compensation for hill farmers for the sopping summer that we had earlier this year, but what compensation will be given to fishermen for the reduction in the cod quota?
What attempt did the Minister make to get Britain a bigger allowance within the total allowable catch if that is to be reduced? We provide most of the fishing area. What proposals has the Minister, if there is to be this reduction, for conservation measures that will rebuild the cod stocks in the North sea? Does he have proposals for closure for spawning, or for the increased mesh sizes, or for increased landing sizes to safeguard the stock and allow it to be built up to a safe level again?

Mr. Gummer: The hon. Gentleman would do his constituents more good if he started by saying that the future of the cod fishing industry depends on the protection of the stock and that the reduction of Britain's quota is to give the fishermen of Grimsby a future for themselves and their children. If he were to support what the Government have done, and the fact that they have gained from the arrangement a fairly creditable amount of the available stock, that would be better. We have all had to take a cut


because it is necessary to protect the hon. Gentleman's constituents. It would do the hon. Gentleman and his constituents more good to fight for an understanding by fishermen of the need for conservation and thus for smaller quotas this year. [Interruption.] The hon. Member for Great Grimsby (Mr. Mitchell) spent much time asking the question and I shall answer. If he is not satisfied, he will ask me about the matter again. If we are to help his constituents, we must protect the cod for the future, and that means a low quota this year.
I know that this causes great difficulty in Grimsby and the other cod fishing ports. We have managed to find alternative fish in the share-out, especially haddock. I know that this is not what the fishermen of Grimsby would wish. In the circumstances, however, it is the best deal that we can get and still protect the cod for the future. I am sure that, in those terms, the hon. Gentleman's constituents, if not the hon. Gentleman, will support what we are trying to do.

Dr. Norman A. Godman: May I point out to the Minister that the presence of Russian and other east European factory fishing vessels in Scottish waters, as mentioned by the hon. Member for Truro (Mr. Penhaligon), is welcomed by the Scottish fishing industry? Those vessels do not fish but rather buy the fish caught by Scottish fishing vessels. I am glad that the hon. Member for Truro now agrees with that. Several Opposition Members have actively supported the need to reduce the bycatch in industrial fishing. I have argued and will continue to argue that industrial fishing must be severely reduced in the North sea and elsewhere.
The deregulation news is good news. I am not sure that the expansion of the inspectorate to 21 members is good enough, considering the expansion of the fishing effort by EEC vessels with the accession of Spain.

Mr. Gummer: The hon. Gentleman is right in his assessment of what is happening in Scottish waters. I agree that he has a distinguished record in pushing for the reduction in the bycatch and for giving credit where it is due.
We are talking about the Inspectorate of Inspectors. One does not need a vast army of inspectors. One needs enough to ensure that the national inspectorates work, and, in Britain as in other countries, ensure that foreign nations fish properly within our traditional waters. I do not think that sheer numbers are the problem. We have had a major increase, and we shall have to see how that works.
As to the accession of Spain and Portugal, of their 300 ships, only 150 will be allowed to fish at any one time in the waters with which we are most concerned. The hon. Gentleman will see that that is not a substantial expansion of Spanish efforts—it is an expansion of the methods of control of that effort. The Spanish will have to work within the regime of the Community. Spain will have to give a monthly list of ships to the United Kingdom beforehand, as well as to France and Ireland. We will have notification of every ship as it reaches the point where it will start fishing. We will be able to keep close control and the vessels will have to adhere to all the logbook arrangements, which are increasingly tough in the Community. The hon. Gentleman should be able to tell his fishing constituents that we can control the Spanish to an extent which has never been possible before.

Gartcosh

Mr. Nigel Spearing: On a point of order, Mr. Speaker. My point of order arises from the exchanges between my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) and the Leader of the House relating to the closure of Gartcosh.
In those exchanges, we learnt that a letter had been sent from the office of the Secretary of State for Scotland, signed by the private secretary, to the convener of the trade union committee at Gartcosh. That letter referred to the report of the Select Committee and in paragraph 2 stated that the shop stewards put their view to the committee that the link between Gartcosh and Ravenscraig was such that if the British Steel Corporation went ahead with their intention to close Gartcosh, then the closure of Ravenscraig would inevitably follow. You gave Mr. Younger papers in support of the arguments which you and your colleagues had developed at the meeting.
Part of paragraph 6 states:
The overriding factor in persuading Mr. Younger to come to his decision has been the clear and firm statements by the Corporation that Ravenscraig's future is not prejudiced by the intended closure of Gartcosh, particularly in evidence to the Select Committee.
The Secretary of State and his private secretary had referred to the impending reply by the Government to that Select Committee. Mr. Speaker knows, as does the rest of the House, that such replies are Command Papers. Select Committees expect and usually get from the Government the respect that is due to them. My point is that the terms of this letter pre-empt any considered reply by the Government to that Select Committee. The fact that the letter is dated the day of that report downgrades and preempts the report and, in some respects, shows discourtesy not only to the Committee but to the House, which allocated duties to that Committee. Does that not require a comment from you, Mr. Speaker, as upholder of the rights of Back-Bench Members and the House and later, perhaps at an appropriate time, comment from the Leader of the House?

Mr. Bill Walker: rose—

Mr. Speaker: Is it on the same point of order?

Mr. Walker: Yes, Sir. I draw attention to the problems of the members of the Select Committee on Scottish Affairs and the uncertainties created by the activities of its Chairman. The hon. Member for Glasgow, Garscadden (Mr. Dewar) advised the House on the Wednesday evening that the Chairman and the Labour members of the Committee had asked to be removed from it. Further to that, the Chairman put forward proposals on Scottish radio and television—I did not see the television programme—and in the press. The Chairman proposed to call a meeting of the Select Committee—he did so on a radio programme in which I took part.

Mr. Speaker: I cannot answer for radio programmes.

Mr. Walker: It followed that the Committee had received only 48 hours' notice of this meeting. Consequently some members of the Committee were unable to be present. I wish your guidance, Mr. Speaker, on how hon. Members serving on Select Committees and other Members of this House can be protected from such uncertainty. We did not know whether the Committee was going, running or existing. Those of us who take our duties


seriously, particularly our duties on Select Committees, are worried about what happened. It is not surprising that the Secretary of State was equally uncertain what was happening.

Mr. Speaker: May I answer both questions, but separately. I say to the hon. Member for Newham, South (Mr. Spearing), who raised this matter on behalf of his hon. Friend, that if, as he is alleging, the Secretary of State for Scotland has been discourteous to the Committee, that is a matter for the Committee to take up with the Secretary of State. It is not a matter for me.
The hon. Member for Tayside, North (Mr. Walker) will know, as he has been in the House for a long time, that this Select Committee was appointed on the recommendation of the Committee of Selection and that only it can recommend that an hon. Gentleman be taken off a Committee. It is not a matter for me.

Royal Assent

Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:

1. Consolidated Fund (No. 3) Act 1985.
2. European Communities (Spanish and Portuguese Accession) Act 1985.
3. Northern Ireland (Loans) Act 1985.
4. Fraserburgh Harbour Order Confirmation Act 1985.
5. Fraserburgh Harbour (No. 2) Order Confirmation Act 1985.
6. Fraserburgh Harbour (No. 3) Order Confirmation Act 1985.
7. Okehampton Bypass (Confirmation of Orders) Act 1985.

BILL PRESENTED

DRUG TRAFFICKING OFFENCES

Mr. Secretary Hurd, supported by the Prime Minister, Secretary Sir Geoffrey Howe, Secretary Sir Keith Joseph, Mr. Secretary Fowler, Mr. Peter Brooke and Mr. David Mellor, presented a Bill to make provision for the recovery of the proceeds of drug trafficking and other provision in connection with drug trafficking and to increase the number of assistant commissioners of police for the metropolis: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 54.]

Orders of the Day — Building Societies Bill

Order for Second Reading read.

Mr. Speaker: Before I call the Minister to move the Second Reading, I must announce to the House that I have selected the reasoned amendment in the names of the Leader of the Opposition and his right hon. and hon. Friends.

The Economic Secretary to the Treasury (Mr. Ian Stewart): I beg to move, That the Bill be now read a Second time.
The story of British building societies has been one of success and of national achievement over many generations. They have helped millions of people to buy their homes. Currently more than 25 million of our fellow citizens use the societies for their savings. Indeed, at the outset I should declare that I have a share account and a building society mortgage, and I suspect that the same is true of the majority of hon. Members. The societies have promoted their traditional purposes of thrift and home ownership for nearly 200 years. The main purpose of the legislation before the House today is to enable them to continue to develop and prosper in a world which has changed a great deal since the societies came into being at the end of the 18th century.
The Bill is the most far-reaching legislation on building societies for more than 100 years, since the Building Societies Act 1874. There has been amending legislation since, notably in 1894, 1939 and 1960, but the fundamental structure of the 1874 Act has survived until now, and the consolidated Act of 1962, which is now in force, still bears a clear similarity to it.
But time has moved on, and as the societies themselves have changed since their humble beginnings, so has the market place in which they operate. Individually, the largest societies are now among the great institutions of our land. Collectively, the societies represent a major influence not only on the housing market but in the financial system as a whole.
In today's fast-changing markets, societies need to be able to offer a wide range of facilities to an increasingly sophisticated public if they are to continue to compete effectively. New technology and greater customer awareness are posing a new challenge for all financial institutions, but I believe that, by allowing the societies more scope, we will not only enable them to develop their business but will bring extra healthy competition into housing and finance.
Seen from today's perspective, the existing legislation contains restrictions that no longer make sense either in commercial or in prudential terms. For example, although societies can arrange insurance on a borrower's garage, they cannot obtain cover for his car. They can supply him with a valuation report by a staff valuer, but it cannot be extended to a full structural survey. There are many other such limitations which, as time has passed, have come to seem increasingly illogical.
Many technical provisions of the old legislation have simply become out-of-date, reflecting neither the sort of institutions that societies now are, nor the corresponding


legislation for companies that has been passed in recent years. Some provisions are entirely anachronistic. It is safe to say that we no longer need a prohibition on balloting for mortgages to see which member will be lucky enough to get the next advance. Nor need an officer any more put up personal security for the funds in his charge, rather as though he were treasurer of the Christmas club.
Such considerations have led us to conclude that completely new legislation is needed, not just another in the long line of amending Bills. Therefore, I do not apologise for the fact that the new Bill is large. Beside providing new powers for the societies, it thoroughly modernises their legislative framework, and incorporates many of the provisions which have already been enacted for companies in the Companies Acts of the past 25 years. Before embarking on such a fundamental revision, we thought it right that there should be a full process of consultation. Since the Government's Green Paper was published nearly 18 months ago, we have received and considered a wide range of comments which have been of great assistance in formulating our proposals. On some matters, consultation was not completed in time for inclusion of the necessary provisions in the Bill, and one or two are still under consideration, and on these I propose to bring forward amendments in Committee.
Although the Bill marks a fresh start in terms of building society legislation, I should at once say that its primary theme is continuity based on a successful formula. So the basic function of providing loans for house purchase from the savings of members will continue to form the core of building society business. But the Bill is designed to allow considerable diversification around that central theme. Societies will be able to provide a much greater range of services, but the emphasis will still be on their primary function.
Some flexibility has been deliberately included in the Bill. As time goes by and in the light of experience, the specific powers and the quantified limits placed on them may need revision. Therefore, the Bill provides for some of those aspects to be amended, within limits, by statutory instrument, so that necessary changes need not be shelved until a place for primary legislation can be found in the busy parliamentary timetable.
The new powers that societies will have fall broadly into two groups—those that involve the balance sheet, mainly in the form of new types of lending and other assets, and those that involve the provision of new sorts of services.
The commercial assets of a society are defined as all its assets other than fixed assets and its liquid funds, and they are divided into three classes. Each class is subject to quantified limits, which will be variable so as to provide for some further evolution; but again only within limits, since there comes a point when extension of the permissible proportion of the new types of assets would no longer be consistent with the basic purpose of societies, and where fresh primary legislation would be appropriate if further change was proposed.
Class assets correspond to the principal existing mortgage business of societies. They consist of loans secured on first mortgage of property for the borrower's residential use. Such loans account for about 99 per cent. or more of present building society lending. So the requirement that at least 90 per cent. of a society's total

commercial assets should fall within class 1 allows ample scope for developing other business. But the 90 per cent. requirement will ensure that the great bulk of building society lending continues to be of the sort traditionally done by the societies. I should add that the Government still intend that class 1 should include loans secured on shared premises such as houses split into two flats, one of which is occupied by the owner, or corner shops with flats above them.

Mr. Peter Viggers: I apologise for challenging my hon. Friend on what may appear to be a detailed point, but can he give us any idea of how the Government will interpret the division between the part of a premises occupied by the proprietor and the part not occupied by him? Do the Government expect that there will be a restriction on lending on business premises only 40 per cent. of which are occupied by the person who seeks the loan? Do the Government have a percentage in mind?

Mr. Stewart: We have in mind a figure of 40 per cent., which should allow for shared property between domestic uses, allowing for part of the premises to be in common use. A similar percentage would apply to commercial uses.
The balance of up to 10 per cent. of a society's commercial assets will be available for other purposes. In principle, the whole of that figure may be used for what are defined as class 2 assets, but no more than half of it—or 5 per cent. of total commercial assets—may be devoted to the essentially riskier type of assets which fall within class 3.
Class 2 will consist of other lending secured on mortgage. Some such lending is open to societies now—for example, lending to housing associations or other bodies corporate. But it will also cater for lending on second mortgage. The ability to participate fully in shared ownership schemes and the greater scope for index-linked loans will enable the societies to contribute more effectively to the development of new forms of finance for housing and home ownership.
Class 3 includes the remaining assets which it will be permissible for societies to hold, including the share capital of subsidiary or associate companies, lending without mortgage security and the ownership of residential land and buildings. The last of these represents an important extension of the capacity of societies to participate more actively in the provision and rehabilitation of housing and in projects involving housing associations and local authorities. My hon. Friend the Under-Secretary of State for the Environment will have more to say about that when he replies to the debate.
The new power to lend without the security of first or second mortgage will allow people to borrow from their building society for other purposes, for example, to meet the expenses that inevitably go with buying a new home, such as carpets, curtains and furniture. It will also enable the societies to offer a more comprehensive banking service. To encourage societies to spread their business and their risk in this new area of lending there will be a limit of £5,000 on class 3 loans to any individual. Because of the need to ensure that a society has sufficient depth of management to undertake class 3 lending or the ownership of land, these powers will be exercisable only by societies with at least £100 million of commercial assets.
The 1962 Act did not address itself to the need for societies to maintain adequate liquidity, merely referring


to the investment of what is called "surplus funds". In the more competitive market conditions of the present day the legislation needs to be more explicit about the function of liquid assets. At the same time it provides that the proportion of total assets that may be held in liquid form should be limited to one third, the purpose of this being to ensure that the balance sheet of a society reflects its principal purpose and that its capital should not be used to support the conduct of a money market business for its own sake.
For a similar reason a limit is also placed on the other side of the balance sheet in respect of the proportion of liabilities that can be raised from wholesale sources. The 20 per cent. limit on such funds should allow societies adequate scope to increase their wholesale borrowing, but it means that they must continue to raise money primarily from individual members. Not only is this in tune with their own traditions, but experience shows that a solid funding base is essential for the prudent management of deposit taking institutions.
I have already alluded to the anomalies and inconsistencies in the range of services which building societies can offer under the present law. The Bill includes a new and specific list of what they may do, enlarging their scope to compete in the provision of services related to both finance and housing. In addition to more comprehensive money transmission and banking services, they will be able to handle a wider range of insurance and investment matters. New opportunities will also be open to them in the housing market to own estate agencies and to provide structural surveys as well as valuations. The existing prohibition on conveyancing will be lifted, although, like other institutions, societies will have to comply with rules to be laid down by the Lord Chancellor.
With more institutions expressing interest in entering the housing market, it makes sense for the societies to be able to offer other lenders the benefit of their own skill and experience as managers. The societies will thus be able to engage in property management and to manage mortgages. And as more people now move home from one country to another in Europe, it is right that societies should no longer be prohibited from operating elsewhere in the European Community.
The use of the further powers contained in this Bill will clearly expose building societies to new risks with which they will be unfamiliar. While the prime responsibility for protecting their reputation for soundness will continue to rest with the boards of the societies themselves, we certainly need to strengthen and modernise the arrangements for their prudential supervision as their business becomes less restricted. Although the problems that have arisen in relation to building societies in recent years have not been unduly serious, we must not neglect the need for their proper supervision. And the supervisory system for the societies must reflect and respond to developments elsewhere. The Government are committed to providing for the first time a comprehensive framework of regulation that maintains confidence in the financial sector as a whole. My right hon. Friend the Chancellor of the Exchequer published his White Paper on banking supervision earlier this week, and the Financial Services Bill is published today. The prudential provisions in the Building Societies Bill are therefore part of the Government's approach to the supervision of financial businesses in general.

Mr. John Fraser: My understanding of the Bill is that building societies will be able to establish subsidiaries that will operate in other member states. Will the Economic Secretary to the Treasury confirm that the class 1 asset restriction—lending on first mortgages for houses in the United Kingdom—will not be affected? If money is to be raised for lending overseas, will it have to be raised overseas as well as disbursed overseas?

Mr. Stewart: The subsidiary that is operating will need to raise foreign currency in order to lend in foreign currency. Except for a marginal mismatch, that matter would be taken into account by the prudential supervisor.
Accordingly, under this legislation we propose to establish a Building Societies Commission to exercise and extend the functions at present carried out by the Chief Registrar of Friendly Societies. The Chief Registrar himself will become the first chairman of the new commission, which will include people with suitable experience outside the public service, and the supervisory staff of the registry will be strengthened. In parallel with this, the commission will have new powers, based on the Community requirement for prior authorisation of deposit taking institutions.
The main power of the supervisor will rest in the granting and revocation of authorisation and in the imposition of conditions on it. The Bill sets out criteria for prudent management, against which the commission will be able to measure the performance of a society's board. There will also be statutory powers for the commission to obtain from societies the information necessary for supervision, which will be treated as confidential and may be shared with other supervisory authorities only in strictly defined circumstances. And in line with what my right hon. Friend the Chancellor of the Exchequer announced on Tuesday in the case of the banks, we are proposing to make it a criminal offence to provide false or misleading information to the supervisor.

Mr. Jim Craigen: The Economic Secretary to the Treasury has referred to the new commission. What will be the residual position regarding industrial or corporate societies and friendly societies?

Mr. Stewart: I shall be pleased to clarify that point. The Registry of Friendly Societies will continue in being for all of its other existing purposes. The commission will be established only for the purpose of supervising building societies.
New provisions relating to the preparation of the accounts of building societies and the duties of auditors are also included in the Bill. Following the issue of a consultative paper in the summer by the Registry of Friendly Societies, the accounting and control provisions have been brought up to date, and the Government will bring forward appropriate amendments in due course covering a number of further changes which have now been decided. Each year the auditors of a society will have to make a report to the commission, sent in the first instance to the board, on whether the society has complied with the statutory requirements for accounting and control systems. Communication between auditors and supervisor has long taken place, but we shall be introducing measures to permit dialogue between the two on a similar basis to that envisaged for the banking sector.
Since many of the supervisory provisions in the present Bill have been drawn up in parallel with the proposals on


banking supervision and financial services, amendment will be necessary on certain points to reflect the development of policy. For example, detailed provisions will be introduced for appeal against the supervisor's decisions on authorisation to reflect the system as it will in future apply to banks; and adjustments will be made to the provisions governing disclosure of confidential information between supervisors in line with the Financial Services Bill.

Mr. Tim Smith: My hon. Friend referred to the position of auditors, which is dealt with in clause 76(6). It says:
The auditors … shall be entitled".
Does my hon. Friend intend to amend the subsection to read:
The auditors … shall be required
in certain circumstances to communicate with the supervisor?

Mr. Stewart: My hon. Friend draws attention to a point to which I have already referred. The Bill's provisions do not entirely coincide with what has now been announced in relation to banks, where, in certain circumstances, there will be communication both ways between auditor and supervisor. We propose to bring the two into line.
Effective management subject to appropriate supervision is the best means of providing for the integrity and soundness of the societies. But the Bill contains further measures to protect the interests of investors and to ensure that the societies give proper public account of themselves, and compete fairly and openly in the market.
As part of the comprehensive reform of the constitution of the societies, directors will have to make full disclosure of any personal interest in the business of their societies, and there will be new restrictions on loans to directors and their families in line with provisions already enacted for banks.
We propose to put building societies and banks on an equal footing in respect of exemption from the Consumer Credit Act. At present, the societies enjoy exemption from that Act in respect of all their mortgage lending, but under this Bill such exemption will be limited to first mortgage loans for the purchase, improvement or repair of property, and an early opportunity will be taken to enact a similar provision for the banks.
Anxieties have also been expressed about the way in which building societies might exploit their huge share of the housing market in the use of their new powers. We have therefore decided that they should not be permitted to make offers of mortgage conditional on the use of their other services and that the cross-subsidisation of one service by another should be brought above board by a requirement to quote separate prices for each of them.

Mr. Robert McCrindle: Will the Minister explain, in relation to what he just said, why, if that was considered necessary, it was not also considered necessary to remove the conditionality, as I understand it is called, in relation to some of the additional services in which the building societies are now to be allowed to participate, in particular lending on unsecured loans?

Mr. Stewart: The provision of services relating to housing is so closely related to the main function of

building societies, in which they have such a huge market share, that it puts that consideration in a much higher relief than the point which my hon. Friend raises about the rather limited provision that would apply to other sorts of lending.
At present, the building societies operate a voluntary scheme to protect investors, in which not all societies fully participate. The Banking Act, on the other hand, includes a statutory scheme covering up to 75 per cent. of the first £10,000 of any investment, and we have felt it right that the societies should also be required to provide a similar level of protection by statute. They will, in addition, be given the power to provide a higher level of protection by entering into voluntary arrangements, if they so wish.
Throughout their existence, the constitution of building societies has been based on mutual ownership. This Bill is based on the principle that, as long as the members of a society so wish, its mutual status should continue. But mutuality in the conditions of today is not without its problems. It can, in particular, cause difficulties of accountability when applied to institutions as large as some of the major societies are today.
The Bill therefore contains a series of measures designed to enhance the opportunities for member participation and to make the mutual system work more efficiently. The rights of members to vote on resolutions have been overhauled and the extent to which voting rights can be restricted is limited. The election of directors by members is made mandatory, and members wishing to stand for election will be able to circulate statements in support of their candidature. The rules for co-option and proxy voting will be tightened.

Mr. Richard Ottaway: While I welcome the protection envisaged in the Bill for investors in and members of building societies, the measure makes little reference to protecting building society borrowers. What does my hon. Friend propose to do about abuses by building societies, say, of the introduction or use of penalty clauses in mortgages, the portability of mortgages and the way in which building societies set their interest rates? Does he propose to introduce any regulations or to amend the Bill in those respects?

Mr. Stewart: I do not have such amendments or regulations in mind. With increasing competition within the building society movement and between building societies and banks, those building societies which seek to impose unacceptable conditions on the lending they make are not likely to get the business of my hon. Friend and those who think like him.

Mr. Christopher Hawkins: Building society borrowers need a guarantee that they will be charged the market rate of interest on their mortgages after they have become locked into them. The Halifax has cut its interest rate for new borrowers but not for existing borrowers.

Mr. Stewart: I appreciate my hon. Friend's point, but I do not think it would be proper to set out in legislation for any group of companies or institutions the precise way in which they should set the terms of their lending, and we have no plans to do so in this measure.

Mr. Peter Pike: The question of protection and proxy voting will be vitally important should a building society ultimately move forward to incorporation.


There is fear that there will be abuses of the present proxy voting system. Will the safeguards to which the Minister referred ensure that on any of those matters the members will take the decisions and the decisions will not be taken for them?

Mr. Stewart: We are anxious that all decisions are properly taken by the members on mergers, conversion or any other matters to do with the ordinary routine business of the society. The measures that we are suggesting for proxy voting will tighten up the procedure and make it less open to any abuse of the kind about which the hon. Gentleman is concerned. I hope that that will be the result of the provisions that we are bringing forward.
Two important constitutional issues which have attracted much comment are those of mergers and conversion to companies. Again, we are providing for increased participation by members before any such change can be implemented. In addition to the 75 per cent. majority of investors voting, any proposal for merger or conversion will also require the approval of a majority of borrowing members voting so as to protect the interests of those with mortgages. When a merger involves a society being absorbed in a much larger one, there is to be a minimum vote required of 20 per cent. of all its members.
Despite these safeguards, some directors of smaller societies have expressed misgivings about the plan to allow a society which sees advantage in a merger with another to put its case directly to the latter's members, even if its board does not agree. I recognise their worries and we are considering some detailed amendments to the procedure, including tying it more closely to annual general meetings rather than to special meetings. But I am sure that it would be wrong to allow an unresponsive board to insulate itself entirely from commercial pressures against the wishes of the shareholders.
Equally, I am convinced that it would be wrong to forbid the members of a society to make a decision that it should incorporate, if that is their clear wish. Along with the Bill, we published a consultation document on the procedure for conversion, since the technicalities involved are complex. But the principles are clear and simple. We need to prevent the movement of speculative funds from one society to another in search of easy profits, and to protect the rights of members in societies undergoing conversion without giving them an incentive to convert purely to capitalise on their stake in the reserves.
Furthermore, during the first five years of a former society's existence as a company, no single shareholder will be able to hold more than 15 per cent. of its capital. The provisions we propose should ensure that a society is converted into a company only if its members clearly wish it to evolve beyond the constraints of the building society legislation, and that, if it does so, it would be able to convert in a manner which does not involve surrendering its independence.
The Bill gives the building societies important new opportunities to respond to the needs of their customers today and to plan for the future. Our purpose has been to provide a framework in which each of them can develop in the way it judges best, while always retaining the essential characteristics on which their reputation has been based.
Of one thing I am sure, and that is that there will still be room for societies of all sort—large and small, national, regional and local—so long as they provide

the services that the public want. Indeed, the Bill should not diminish but enhance the diversity of the building society movement, which has been one of its greatest strengths.
The societies have given outstanding service to the community since the time of our grandfathers' grandfathers, and this legislation will enable them to continue to do so for many years to come. I commend the Bill to the House.

Dr. Oonagh McDonald: I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
this House declines to give a Second Reading to a Bill which extends to building societies powers to engage in unsecured lending and commercial investment which may lead to their failure to maintain their commitment and responsibility for increased housing finance; weakens this commitment by the facility for societies to become public limited companies with only a commercial interest in housing finance; creates the risk of United Kingdom and foreign financial institutions taking over smaller societies; increases financial risks without substantially new statutory means of control; and reduces public accountability.
When appearing on a television chat show in May 1983, Clive Thornton, the then chief general manager of the Abbey National, described the building societies as the highest form of Socialism. If that were wholly true, we could understand the Government's enthusiasm to introduce a Bill which, over a period of time, could fundamentally change the nature and status of the building societies. We do not totally accept that description of building societies, but, as the Minister has said, the societies have performed an important service for a long time by providing a stable system of housing finance.
The fact that mutual organisations are non-profit making has enabled them to fulfil social and housing needs, as well as maximise their profits. That feature differentiates building societies from profit-making companies. We may come to regret the fact that within five or 10 years building societies, as a mutual sector focusing on housing needs, could slowly disappear.
The Bill has been introduced in response to pressure from some members of the building societies movement, especially the large building societies, in particular, the Halifax and the Abbey National. Some of the changes proposed in the Bill are unnecessary and could detract from the main purpose of fulfilling the housing need. We do not oppose the principle, but we are concerned about the possibility of building societies being converted into public limited companies.
I said earlier that we were anxious about the publication of the consultation paper. The Minister has said that the process of conversion from a mutual to a public limited company is complex. His recent experience in that area has not been entirely happy. Therefore, the consultation document should have been published earlier and we should not have to wait until the end of the proceedings on the Bill to analyse and debate the clauses that will allow building societies to be converted.
I emphasise that the Opposition are opposed to allowing building societies to convert from mutuals into public limited companies. We do not consider that that move is necessary. We believe that it would bring about enormous changes in the building society movement.
In the City the proposed legislation has stimulated great interest in building societies. The reasons are obvious.


Building societies have 26 million customers and 7,000 branches. Interest has been shown by various financial institutions, to the surprise of the deputy secretary general, Mr. Mark Boleat, who, in the Financial Times of 7 December 1985, admitted:
It is clear that there are many predators around who want to get their hands on building societies and their branches.
It is perhaps a little late in the day for the Building Societies Association to recognise the implications of the big bang that will occur in 1986.
I am aware that the Minister has tried to build safeguards into the process of conversion, but it could lead to mergers. Building societies could become even more dominated by a few large societies, which may then convert into public limited companies. One or two societies have already expressed the wish to become public limited companies. They could be then taken over by other financial institutions, and the result would be large financial conglomerates whose main business would no longer be housing finance.
If societies become large financial institutions, they may be anxious to retain a higher cash ratio, which could have implications for foreclosures on mortgages. The House will know that the building societies have an excellent record; the number of foreclosures is small. As constituency Members, we are aware that building society managers are often anxious to assist mortgagees to retain their mortgage, despite difficult financial circumstances or a family crisis. I hope that the Government have properly considered the long-term future.

Mr. Tim Smith: Is there any evidence that the clearing banks, which are now quite big in that market, foreclose more often than the building societies?

Dr. McDonald: The Minister should be able to answer that. We want to know whether that has been considered in the formulation of the Bill. Both sides of the House are anxious for a stable system of housing finance to continue, and no one would wish for an increase in foreclosures. We wish to know whether the Minister has made any comparison and what the future possibilities are.
The changes in the building society movement could lead to an increase in the market for secondary mortgages. Those are not so attractive in Britain as they are in America, where there is a fixed rate of interest on mortgages. However, there could be an attractive market here, because it is a safe method of lending. If that market increases, what protection will there be in the legislation for the borrower? Have the Government considered that eventuality, which is important for the future of housing in Britain?

Mr. Ian Stewart: It would be for the borrower to ensure that the terms of a second mortgage were suitable. That applies whether it is offered by a building society or by any other lender.
The hon. Lady also mentioned that there might be more foreclosures or a different attitude to borrowers if there were a merger or a conversion into a public limited company. I emphasise that the new provision means that at least 50 per cent. of borrowing members would have to vote to approve any change, such as a merger or a conversion. That would place the onus on those proposing a different corporate structure or ownership to satisfy the

borrowers that they would not be placed in a worse position. That could be a difficult task. The borrowers would have a new power, through their votes, to exercise their judgment as to whether they wanted such a change. They would not be going in with their eyes closed.

Dr. McDonald: I appreciate the Minister's remarks about that provision. However, we wish to be reassured that the onus is on the societies to make clear to the borrowers the implications of any change in structure.
I believe that the Minister misunderstood my point about secondary mortgages. The hon. Gentleman referred to second mortgages. A secondary mortgage is when a parcel of loans is sold off to another company. Perhaps the Minister could reply on that point.
There are two or three points to be made about unsecured lending. First, Labour Members do not see the necessity for another source of unsecured credit. As anyone who walks down the high street knows full well, there are already many sources of unsecured credit. It is not necessary for building societies to provide it as well. In fact, the Consumer Association said that only a quarter of building society members whom it surveyed were interested in that particular facility being provided.

Mr. John Watts: The hon. Lady says that in a survey only 25 per cent. of building society members were interested in taking advantage of that new facility. Would she concede the possibility that a wider range of services being made available by building societies might well make them more attractive to a wider investing public and that that would increase the flow of funds into building societies for the purpose of their major objective, which is lending for house purchase?

Dr. McDonald: That is possible, but I do not think that that is the main reason for people choosing to invest in a building society as opposed to some other form of organisation.
There has been a growth in consumer credit under this Government. It is interesting to note now much that has grown. After allowing for inflation, the amount of debt outstanding in terms of consumer credit rose by about 60 per cent. between 1979 and 1984, and it now stands at over £22 billion—an enormous growth in consumer credit. The Bank of England has estimated that if building societies put half of what was allowed into consumer credit that would add another £2 billion to the outstanding debt and give them a market share of about 10 per cent.
The Minister's proposals in the Bill have been described as modest. That is a fair comment so far as it goes. However, he is no doubt aware that some of the societies are already pressing for an increase in the limits. The Abbey National's view, which was given to us this week, suggests that instead of 5 per cent. of their total assets being used for unsecured lending, building societies should be allowed to start at 10 per cent. He will also be aware that, although his proposals might be described as modest, they can be changed by parliamentary order. That means that the amount of unsecured credit offered by building societies could increase fairly rapidly over the next few years, once the Bill takes effect.
The building societies claim that they want to become public limited companies because of the necessity for raising capital which they might not otherwise be able to do, so that they can extend their services in a variety of ways. It is interesting that the building societies should put


forward such an argument when, in fact, in the Building Societies Association's October bulletin an article is devoted to describing the success of the building societies movement in raising money on the wholesale market having been given the necessary tax changes and permission to do so by the Government during the 1980s.
It is especially interesting that it should be argued that building societies must become public limited companies in order to raise sufficient capital when not only the wholesale market but the Eurobond market proved attractive for societies. The reason for that is that the unique security which building societies as mutual institutions offer means that those looking for sterling floating rate assets will find building societies' floating rate notes particularly attractive. In other words, building societies have not found that they have suffered particularly great difficulties in raising funds over recent years; and they appear to have every opportunity to continue in that way. Therefore, we reject the argument that some building societies have put forward for wanting to become a public limited company, and we do not consider that to be necessary. We would rather that they remained in the housing sector as mutual organisations.
Let me deal with some of the issues which will affect the small building societies and investors. I am concerned that the investor protection scheme proposed in the Bill falls short of the level of protection currently available to most building society investors. I cannot see that there is any reason, particularly as building societies are entering into more risky ventures, for reducing that level of protection. I hope that the Minister will consider amendments to that in Committee. If not, the Opposition will certainly stress the need for that.
The Building Societies Commission is obviously an area at which we shall look closely since we are concerned that building societies should be properly regulated. One of the issues that the Minister must make plain in the course of our debates on the Bill is that the commission will have adequate resources. Secondly, we shall want to know a great deal more about the relationships between the commission and the other self-regulatory bodies and the proposals to regulate banking activities. In so far as building societies engage in those activities, they should come under banking regulations.
The Minister referred to the anxieties of small and medium-sized societies which fear the prospect of hostile takeovers. I am glad that he intends to respond to some of that pressure. I have received a number of such letters and I must mention one from the Essex Equitable building society which operates in my constituency. It is the fifth oldest in the country and, as it says, has grown steadily if slowly. It is a small society, but I have a particular interest in ensuring that it is protected from any hostile takeover bid; and that applies to other societies which have made their views clear. Many of the small to medium-sized societies offer either a specialist service or a service to a particular area. There is no reason why the minnows should be swallowed up by the whales. I hope that the Minister will ensure that they are properly protected.
We are glad to see some of the other services being offered by building societies in connection with house building, but we shall want to ensure that the consumer—the borrower—is properly protected against conflicts of interest while at the same time making sure that the legal profession does not have it all its own way.
The Opposition feel that the Bill contains proposals which in the long term could mean that the building societies movement as we know it will disappear from the scene. Its loss is something that we could well live to regret. It has served us well. It has provided for many people's housing needs throughout the country. We want to make quite sure that it will continue to do so. We are not certain that the proposals in the Bill will ensure that that will happen.

Mr. Christopher Hawkins: I am grateful to you, Mr. Deputy Speaker, for the chance to speak about this important Bill.
I, too, have certain misgivings. I would prefer building societies to stick to their last and to remain as mutual societies, friendly societies, which were set up to help people to buy their own home. What better aim could they have? I do not want to see them lending money for people to buy motor cycles or holidays abroad. I do not want to see them become banks and put up charges to make profits for shareholders.
I ask the Minister to assure me that he will carefully monitor the effects of the Bill, and will be prepared to come back with new legislation if the fears of some of us are realised and if changes occur which are not in the public interest—and in particular not in the interest of home owners.
To some, the Bill may appear merely to tidy up the current law relating to building societies. To others, its importance will lie in the extension of powers giver, to building societies so that they may, if they wish, become full-blown banks or may extend into providing services such as insurance, estate agency, conveyancing and valuation. Those aspects of the Bill merely allow building societies to do what others are already doing. They will not radically change people's lives.
There is, however, one clause in the Bill which will allow building societies to do something which is radical and different. It is clause 10(4)(a) in part III, which gives building societies the power to make advances in which
the amount due to the society may be adjusted from time to time by reference to such public index of prices as is specified in the mortgage".
Although it may seem an insignificant clause, it would be possible to write a book on what it implies. In fact, I wrote a book on what it implies, in early 1983. I would not normally seek to plug a product in this House but, as many other hon. Members wish to speak, instead of saying all that I should like to say on this complex topic, I will merely say that the book is called "Britain's Economic Future" and is available in the Library for those who would like to see it. Having campaigned for several years for index-linked mortgages to be widely available, I am naturally delighted to see clause 10 in the Bill.
The problem with the conventional mortgage is that the money payments are constant over the life of the mortgage. Therefore, in real terms they are very high to begin with and decline over time as inflation erodes their value. To buy even a £20,000 house at recent interest rates costs from £40 to £45 per week, even after allowing for tax relief. With the addition of the cost of rates, water rates, repairs, maintenance and so on, it creates a real burden for a young married couple on average earnings or less.
In the early years of marriage, the burden is especially high because of the need to furnish the home and because many will be raising a young family. Later, the burden will become far lighter, partly because commitments will have declined but mainly because inflation will have eroded the value of the payments that need to be made, and the couple will have had a major growth in their real living standards as the economy grows.
The present mortgage may be fine for those who can afford it, but for many the burdens are the wrong way round. The burden is greatest when they can least afford it in real terms; the burden is least when they can most afford it. Index-linked mortgages solve that problem by having low payments in the early years, which rise over time as incomes and prices rise. Under those schemes it will be cheaper to buy a council house than to rent one. It will be cheaper to buy a £20,000 private sector house than to rent the average council house. That will radically affect many people's lives.
It is true that the mortgage payments will rise over time in line with inflation, but so do rents. It is better to have a smaller mortgage payment rising with inflation than to have a larger rent which also rises with inflation. As a result of introducing such mortgages on a widely available basis we could well see, by the end of the century, over 80 per cent. of families owning, or in process of buying, their own home.
We have given people the right to buy. In the Bill we can now offer them the means to buy. Together, the changes will create a property-owning democracy on a scale never dreamt of before. In doing that, we shall have created one of the biggest social revolutions of the century. For those reasons, I commend this radical and important Bill to the House.

Mr. Gordon Oakes: Like the Minister, I must begin by declaring an interest, in that I have a mortgage and a building society account. I am also an honorary—I stress the word "honorary"—vice-president of the Building Societies Association. I assure hon. Members that I get no fees and have no directorships. I attend an annual vice-presidents' dinner, but I do not think that my mind is too much swayed as a result of that.
I am very proud to be a vice-president of the Building Societies Association because the origins of building societies spring from working class people. At the beginning of the 19th century, working class people banded together for their own protection from rapacious landlords or employers who wanted not only to own their souls at work but their homes. Therefore, working class people banded together in a mutual institution to buy their own homes.
The origins of building societies are closely linked with my part of the world, the north of England. Among the greatest and oldest societies are the Halifax, the Burnley, and the Bradford and Bingley. They are northern names of northern societies set up by northern working people many years ago. As a result, building societies are steeped in the principles and practice of mutual aid. I am glad that the Bill preserves that characteristic, while at the same time bringing societies out of a straitjacket of an Act which is 111 years old this year. The Act of 1874 is the principal Act. There was an Act in 1962 but it was merely a

consolidating measure; it did nothing new. Building societies have been constrained by the conditions of 1874 since that time.
I welcome the Bill and I assure the House that the Building Societies Association welcomes it. I think that for once the Government have got the balance right. That is the result of three years of extensive consultation with the Building Societies Association, with building societies and with others. It is essential that we get it right, because it may well be another century or half-century at least before we have another comprehensive Act.
In the commercial climate, in competition with other financial institutions, building societies at present have one hand tied behind their back. Despite that, they have enormous popularity with the public. We are not talking simply about building societies or about the association; we are talking about people—constituents.
I have some facts and figures which may astound some hon. Members. Over 60 per cent. of all adults in Britain have building society accounts. That means about 28 million individuals. Societies have been particularly successful in attracting business from the younger age groups. A research survey in 1983 showed that no fewer than 52 per cent. of those in the 16 to 19 age range had building society accounts, compared with only 29 per cent. who had bank accounts. Well over 60 per cent. of all adults in the 20 to 30 range are building society investors. Societies have helped considerably to spread the habit of saving and efficient money management among the young. It may astound the House to know that over a third of all children now have building society accounts, although individually the amounts are small.
The popularity of building societies arises from their friendliness and the sense of belonging. People feel that they are wanted by the societies in the 7,000 outlets at which they can do their business with the societies. Those outlets are usually in the high street where the shops are. They are easily reachable. One principal reason is that they are open when people need them whereas banks are not, for example, on a Saturday, at tea time or after 3·30 pm.
The Bill brings many improvements. I shall deal with clause 14 and unsecured advances. I do not agree with my hon. Friend the Member for Thurrock (Dr. McDonald) in her anxiety on that matter. It is only a small proportion of building society funds that can be used in that way. It is right to enable a borrower to buy furniture or to pay for home improvements or essential repairs when it would be meaningless and costly to add those to the mortgage.
The Bill gives power to the building society for cash dispensing facilities. They are a doubtful legality at present, although some building societies do have cash dispensers. Most importantly, it gives power to the building society to issue cheque guarantee cards. At the moment if a building society were to give a cheque book it would be of little use without a guarantee card. To do that would almost certainly be illegal under the Building Societies Act 1874.
Clause 15 of the Bill gives building societies the power to own land for residential purposes. That is important in inner cities and it enables building societies to become what their name implies, a "building society" rather than a mere loan club. That is even more important in the concept of shared ownership. I agree with much that the hon. Member for High Peak (Mr. Hawkins) said about the burden of the mortgage being at a time when the borrower can least afford it. One answer to that is shared ownership.


At the moment, it would be illegal for a building society to own the rented part of that shared ownership. That would have to be avoided by various legal devices. The Bill will enable the building society to own the rented part.
I know that the Bill cannot do anything about our land tenure system but I believe that it is ludicrous. If one was to buy a back-to-back, small terraced house, or even a flat, the mechanism and the law involved in buying it is the same as if one were buying a baronial medieval estate. It is time that some Government—I hope that it is my Government—brought the whole issue of land tenure in Britain kicking and screaming out of the 14th century and put it in the 20th and 21st centuries. The power of ownership under clause 15 allows some flexibility. I want to see that, as I know from his speech does the hon. Member for High Peak.
The Bill gives power in clause 16 for the major societies to operate in the EEC. That is important today because many working people retire to Spain or Portugal and buy a villa. It is important that while buying that villa they have the help of their own building society, the one that they are used to, especially when they are operating under foreign law and in foreign climes. Such people are not tax exiles; they are rain exiles. They go away after a summer such as we have just had and they want to live abroad in order to buy sunshine. Why confine clause 16 to the EEC? Why not make it a worldwide power instead of just a European geographical area in which building societies can operate that clause?
There is also the important provision of new services. It is right that a building society investor can use his account to pay gas or electricity bills. The building society can also operate insurance facilities, foreign exchange, valuation and estate agency facilities. For example, the Leicester building society introduced a scheme a couple of years ago called Home Link. It is a pioneer scheme using computers in one's home. With the aid of a television set and telephone, one can pay bills and deal with many matters. That is a boon to disabled people because they do not even have to leave their houses in order to pay bills. That is the sort of innovation and experiment that the enabling power will encourage.
My first major criticism of the Bill is that it does not deal with conveyancing. My hon. Friend the Member for Great Grimsby (Mr. Mitchell) was let down by the Government in that matter because he withdrew his private Member's Bill on an undertaken that the Government would do something. However, on the day that the Bill was published, 6 December, the Solicitor-General told the House:
the Government have concluded that there is no difficulty in principle in such institutions providing conveyancing to persons to whom they are not also offering a loan. However, the Government are not satisfied that lending institutions could safely be permitted to offer both conveyancing and a loan in the same transaction. It is therefore proposed to prohibit lending institutions from providing conveyancing, either directly or through a subsidiary company in which they hold a majority stake, to those who are also borrowing from them."—[Official Report, 6 December 1985; Vol. 88, c. 354.]
That is arrant nonsense. What conflict of interest can there possibly be? The building society is obviously just as worried and entitled to ensure that the purchaser has a good title as the purchaser himself. It is lending its money to the purchaser, so there is no conflict of interest.
When I was a solicitor the practice was that the purchaser's solicitor invariably acted for the building

society as well. I believe that that still happens today. The building society instructs the purchaser's solicitor. I can see that there could be difficulties if, for example, a building society had foreclosed and was selling the house through a loan to another purchaser, but rules can be made and drawn up to deal with that matter. It is nonsense to say that building societies should not have the power to provide conveyancing services.
My hon. Friend the Member for Great Grimsby was temporarily out of the Chamber, but as he has now returned I shall repeat that I feel he was let down by the Government on the undertaking that they gave him. I was convinced that the Bill was the vehicle by which that undertaking could be carried through. It is obvious from the Solicitor-General's statement that that is not the case. No doubt, my hon. Friend the Member for Great Grimsby will deal with that at greater length.
I am worried about building societies becoming limited companies. I do not think that many will want to do that. There may be a need for the odd experiment in that direction but, given the constraints that the Government have rightly put in the Bill, there will be few building societies which will have a sufficient percentage of investors who will want to convert the society to a limited company.
Clauses 84 and 85 worry me. They deal with the matter of unagreed mergers. I think that I know what the Government are worrying about. Their object is to protect members from directors blocking the merger for their own ends. I stress to the Government that a building society is a mutual institution. It is not a company. Therefore, I cannot see how one can have an unagreed merger of a mutual institution of that nature.
My second worry about those clauses is that the membership list could be subject to abuse. I know about the Data Protection Act 1984, but people could obtain that membership list and use it for many purposes. It is a valuable commodity. It identifies the amount of money that people have at their disposal. That is something that commercial companies would give their right arms for. It would enable them to check the credit of particular individuals. I think that in Committee something should be done about safeguards against abuse.
The third matter that worries me is building societies' staff. If an unagreed merger is possible, there should be some way of consulting the staff. The Bill provides for the society members to be consulted, but the staff should have some say in the matter. That must be put right in the Bill.
On the subject of agreed mergers, there is no doubt that societies will continue to merge. In 1974, there were 416 building societies, and at the end of last year there were 190. In 10 years, there has been a considerable merging of building societies, and that will continue.
The smaller building societies do not have a great deal to worry about from the Bill because, as my hon. Friend the Member for Thurrock correctly said, they offer specialised services. Some offer those services geographically. They give more favourable treatment to people within their own counties. That is commendable. Other building societies look not so much to the geography of an area but to the characteristics of the residential property upon which they are lending. They might, for example, look more favourably on thatched houses than most building societies. Some building societies will not touch them. They may look more favourably on houses with a cellar. It has always intrigued me that a house with


a cellar is almost unmortgageable in many parts of the country. I do not know whether the building societies fear for the structure of the house or fear that the existence of the cellar will lead the purchaser to drink so much that he will be unable to afford his mortgage. Cellars are anathema to all but one or two building societies which say that there is nothing wrong with them.
Thirdly, a small society might specialise in a particular class of person. Some societies favoured policemen when they were in police housing. When their service was complete they needed to buy a house. That does not apply so much now because many policemen live in their own houses during their service. Another example is that of public house tenants. They suddenly find when they are in their fifties and wish to retire that they need other accommodation and a mortgage. Some of the smaller societies specialise in that category of borrower.
In Committee, where I hope to serve, there will be other i's to be dotted and t's to be crossed, but this is a most useful Bill which will be to the benefit of many millions of borrowers and investors. It preserves the nature of the building societies but brings the law up to date for present and future needs. It has the broad support of the Building Societies Association and it certainly has mine.

Mr. Michael Latham: The right hon. Member for Halton (Mr. Oakes) has talked himself into a job with his last remarks about the Committee stage. I am sure that he will make a distinguished contribution to it. I wish to begin by echoing the same interest as he did. It is an entirely non-financial one. Like him, I am a vice-president of the Building Societies Association and also of the Midland Association of Building Societies. They are both honorary, unpaid positions.
I have been involved directly in the building industry for 18 years. I have been a director or employee of a large building company for nearly 11 years. That company has recently combined with two large building societies to assist urban renewal in decaying inner city areas.
My general attitude to the Bill is one of cautious welcome. I was never especially enthusiastic for new legislation in this sphere. The British building society movement is the envy of the world for the efficient and economic manner in which it helps millions of people to buy homes of their own. It has a special place in the affections of our people. They see it as a completely safe investment. I shall say more about that, as the Bill contains some disappointing provisions in that regard.
The public do not regard building societies as a dodgy speculation, run by smart Alicks or City whiz kids. They see their local manager as a pillar of his community, utterly respectable and safe, cautious perhaps, and dull, even in the view of the media or the publicity conscious business entrepreneur. That reputation is to be treasured. Building societies have brought home ownership and completely safe investments to vast numbers of our fellow citizens. They have rarely been troubled by the squalid scandals which have sometimes disfigured the City of London. When building societies have fallen into the hands of crooks or incompetents, the other societies have immediately rallied round to give complete protection to the investing or borrowing public.

Mr. Conal Gregory: My hon. Friend used the phrase "complete protection", but will he confirm that that is not the case and that building societies that have got into difficulties, such as Grays building society, did not give a 100 per cent. return to their investors? It is only marginal protection.

Mr. Latham: I shall deal with that point in a moment.
As a good friend of the movement, I should like to sound a firm word of warning. Yes, let us have cash dispensers, as the right hon. Member for Halton said, improve the savings schemes and compete over interest rates and terms offered to the public, provided that the high street is not filled with too many identical branches. Those changes may be necessary in 1985–86, but we should never forget that the societies' real job is to help people to buy homes. We should never forget that people expect building societies to be cautious, conservative, and even dull. There is nothing but honour in the course that has been followed for the past 150 years. Smart dealing should be left to the whiz kids. The societies do not need that type of business, and they should not be looking for the type of director or general manager who will urge it on them.
I hope that clause 14 business will be the exception rather than the rule for societies. If they have spare money, I hope that they will prefer to use it for residential or other kinds of development in inner city areas under clause 15 rather than to make too many unsecured loans for general consumer credit or activities in the Common Market.
I doubt whether it is necessary for societies to have the powers in clause 14 which enable them to offer loans to the public to buy cars or summer holidays. Surely those things can be left to banks, Barclaycard, Access, or finance companies. But if that concession is to be made to the societies, why should it be restricted to those with assets worth more than £100 million? If the power is acceptable in principle—it is limited to 5 per cent. of assets—there is no clear reason why the smaller societies should be denied it, subject, of course, to the control of the new Building Societies Commission, which will replace the registrar.
A smaller, but completely respectable and greatly respected local society, such as the Melton Mowbray building society, whose assets last year were £72·6 million and which has been helping my constituents since 1875, is as capable of using such a power sensibly and cautiously as a society with assets of £130 million. Either the power is desirable in principle or it is not. I find it difficult to believe that Conservative policy is that big societies can be trusted to behave sensibly but that smaller ones are beyond the pale. That clause will need further consideration in Committee.
There is one power in the Bill that I find utterly regrettable and that I believe should be struck out. It is in clause 84(2) and schedule 13. It has been mentioned by the right hon. Member for Halton and the hon. Member for Thurrock (Dr. McDonald). For the first time, a Conservative Government are offering us the prospect of contested takeovers for building societies. Do we not have enough bids for public companies going on at the moment? Are we returning to the 1960s syndrome of large is beautiful?
I remember the first time that, as a new vice-president, I went to the annual lunch given by the Building Societies


Association for its vice-presidents. The then chairman, Mr. Alan Cumming—he is with the Woolwich—started his speech to his startled audience by saying:
One thing is quite certain. When we meet again in 12 months' time, there will be fewer of us.
He did not mean death, the grim reaper of us all. He meant the flood of voluntary society mergers. Of course, he was correct. Whereas in Leicestershire we had a Leicester Permanent and a Leicester Temperance and then a merged Leicester, we now have an Alliance-Leicester. The Midland Association of Building Societies has lost a leading permanent member. That, at least, was a voluntary arrangement.
The Bill will allow largish authorities seeking growth at all costs to circularise the members of smaller local societies and to offer them "bonuses" to vote for a forced merger. That is not my idea of building society practice.
The Melton Mowbray building society, with branches in Melton Mowbray, Oakham and Grantham, has regularly to rebuff larger societies wishing to absorb it voluntarily. It has an excellent management team, and I wish to see it getting on with the job of granting mortgages to my constituents, not directing management effort to fighting off unwelcome embraces from larger societies.
Under the Bill, if a contested merger is unsuccessful, the same society cannot try again for another three years. But there is nothing to stop another society from doing so the next day. That means that the management of the smaller, locally based, perfectly well run society will be continually looking over its shoulder for takeover bids. That is not a proper expenditure of time for non-profit making, mutual organisations. There is no need for tooth and claw City practices in the building society movement. There are already clear and well used systems for voluntary mergers.
Several societies, other than the Melton Mowbray building society, have written to me and many other hon. Members on that matter. Indeed, the Building Societies Association is opposed to those provisions. I shall certainly seek to have them deleted at a later stage.
Of course, if a society decided to go for company status, as is foreshadowed in the Bill, that would be a wholly different matter. Obviously, the normal rules for takeovers would then apply. I find the concept of contested takeovers of mutual organisations in the interests of growth to be quite abhorrent. Surely no Conservative Member can instinctively feel that it is right for large societies to be given an effective carte blanche, sweetened by cash inducements, to harass the smaller local societies. It does not seem right that that should come from a Conservative Government. It is not my idea of Conservatism. If change is not better—to coin a phrase—it is better not to change.
My final point concerns the investors' protection scheme in clauses 22 to 28, but especially clause 25. I am disappointed with the Government's proposals and with what the building societies have agreed—that in the event of the failure of a society, investors shall be protected only up to 75 per cent. of their investment, or a maximum of £10,000.
In the past, when societies have been in trouble—my hon. Friend the Member for York (Mr. Gregory) referred to the Grays building society—or have been compulsorily transferred by the registrar because of irregularities, investors have been protected because another large society has stepped in to take over the assets

and the mortgage book. I believe that nothing less than 100 per cent. protection is acceptable. That can be done. Indeed, I believe that that has always been done in the past.
Money in a building society should be like a house built upon rock—safe and solid. The voluntary scheme currently operated by societies involves 90 per cent. protection, although in practice it has been 100 per cent. protection. It has worked satisfactorily, and I cannot see any reason to change it. I hope that those provisions will be altered at a later stage of the Bill's progress through the House.
The societies called for this legislation some years ago with the Spalding report and other subsequent documents. I was never enthusiastic about going to any Government for new legislation. I warned them that once the Pandora's box of legislation was opened, all sorts of gremlins and evil spirits might jump out, as in the ancient myth. In fact, the Minister's box has been mainly benign.
Building societies realise that there is some pressure for change from their consumers, and they want to meet that. They have a major and honourable role to perform in combating urban decay. The Bill certainly deserves a Second Reading, but some of us hope that it will be somewhat changed in Committee before it returns on Report. Indeed, some of us will do rather more than hope, and will seek to bring about changes.

Mr. Austin Mitchell: I suppose that, like other hon. Members, I should declare an interest because, in a sense, I own the Halifax building society. I happen to share that ownership with several million other people, and at times I feel as though the society owns me, given the size of my mortgage.
Like other hon. Members, I welcome the Bill. The building societies have served the people well and have encouraged home ownership. They have made home ownership more widely available to a constantly widening circle of people. They have a long tradition of service to the public—some of us might call it Socialism in action, others might call it people's capitalism. We can quibble about the label, but the fact is that building societies have mobilised the savings of the people to serve the community and to advance the cause of home ownership. They can be proud of their record.
However, that record needs to be updated, because the societies face new competition from the banks, there are the problems of new techniques and methods, and new requirements need to be served. Therefore, there is a need for a flexible arrangement that is adequately regulated and supervised. I believe that the Bill provides exactly that.
In common with most hon. Members, I want to look at the Bill from the point of view of the problems and difficulties that it poses. Several hon. Members have pointed to the same problems. The first is the safeguarding of deposits. Through the voluntary scheme that has operated until now, deposits have been adequately safeguarded—up to 100 per cent. in most cases. It is wrong that that protection should be scaled down to bring it into line with the level of safeguarding practised by banks. That will mean less protection, which cannot be right. The current level should have been confirmed, with the banks brought up to that level, rather than the societies being scaled down to the level of banks.
My second reservation is much more substantial. The Bill, together with the regulations that will come from the Lord Chancellor's Department, restricts the ability of building societies to provide the integrated house buying service which they want to provide, and which is a logical and important extension of their role in encouraging home ownership. It is important to have the full ability to provide an integrated house buying service—one-stop shopping, call it what we will—to the consumer. A new generation of people and groups are buying houses who do not have the same middle-class skill of building up an orchestra of a solicitor, a building society, a surveyor and so on, and then conducting the orchestra to provide the full symphony of home ownership.
If organisations compete to provide an integrated service, that is better for the consumer. That competition can come from estate agents employing conveyancers, from solicitors running property shops—they are increasing in number, following the pattern of Scottish solicitors—or from the building societies.
To provide that integrated service was the intention behind my House Buyers' Bill of two years ago. In an attempt to divert support for that Bill from the Conservative Benches—it was striking a popular chord and was obviously a necessary measure—the Government proposed, of their own volition, that building societies, like banks, should carry out conveyancing.
On 20 December 1983, exactly two years ago, the Prime Minister told the House that the Government had decided
to introduce a Bill to enable solicitors employed by institutions such as building societies and banks also to convey houses.
—[Official Report, 20 December 1983; Vol. 51, c. 270]
The Prime Minister must have believed what she was saying because she repeated it in January on the television programme "Weekend World".
In the negotiations about the withdrawal of my Bill, I asked the Government firmly to state their commitment to the promise that they had given, and they did so. On 12 January 1984, the Solicitor-General said in a letter:
We are committed to legislation to enable solicitors employed by organisations such as building societies and banks to undertake conveyancing.
There was no equivocation or reservation—the Solicitor-General said that the Government were committed.
The agreement which formed the basis of my withdrawing the Bill was confirmed in a written answer on 17 February 1984 from the Solicitor-General, who talked of the time
when solicitors employed by banks, building societies and other organisations are permitted to undertake conveyancing for their employers' customers."—[Official Report, 17 February 1984; Vol. 54, c. 347.]
He said for "employers' customers", not anybody else's customers or some remote organisation that the building societies do not own. That is an absolutely clear and unequivocal commitment.
The Prime Minister must have had time to consult the Lord Chancellor—the fount of all Government policy and wisdom, especially on these matters. They were honourable commitments, honourably given, on the basis of which I withdrew my Bill in February 1984. The commitments were confirmed by the Green Paper on building societies. The building societies were promised in that document and on other occasions the ability to offer

their customers a full, integrated house-buying service. Since then, the Law Society has roused itself into a paroxysm of fury about the prospects of building societies undertaking conveyancing. The Law Society fears the competition and the loss of revenue and money that that competition might cause.
Conveyancing has provided over two fifths of the revenue of solicitors' practices. I did not fear the Law Society's anger, because the Government clearly were not going to give way to a sectional interest, however powerful. The Government are the custodian of the general interest and do not want to give way to sectional interests. I did not fear the Law Society's anger because competition is integral and central to the Government's policy and the proposal allowed competition.
The proposal allowed a necessary form of competition because house buying and selling is an increasingly rich market. The circles of home ownership are widening and approximately 64 per cent. of the population now own their own homes. More housing is owned by occupiers and occupiers are moving house more often. House prices are increasing, and the fees are based on percentages of purchase price.
There is a rich market, in which there must be increasing competition. There is a lot of loot to share out, if I may put it that crudely, between the interested parties, and an increasing total of revenue to be shared among that competition. It is essential that the Government allow that competition.
The Lord Chancellor began to act in his capacity as the provisional wing, the political arm, of the Law Society, and started to make demurring noises. We now find that the Bill allows building societies to do conveyancing, but only under the regulations which the Lord Chancellor has rushed to announce.
Why has the Chancellor rushed to make that announcement? Does he want to assure the Law Society that all is well and that he will hold the line until the bitter end? There is no other conceivable reason for rushing out the announcement at this stage. The effect of the announcement is that building societies will be able to undertake conveyancing for other people's customers, and that is absolutely ludicrous. Is a customer of the Halifax to be told, "Well, we can do everything else for you, but we would like you to go across the road and have your conveyancing done by the Bradford and Bingley"? There can be nothing more comic that that. Alternatively, conveyancing may be done by a company which the building society does not control. That is just plain silly.
Why should there be a hands-off operation in connection with conveyancing when other aspects of the integrated service are not so restricted? The pretext for that is that there is a conflict of interest, but I stress that that is only a pretext. That is a last-minute argument dredged up by the Law Society and it has no great validity. If ever there was a profession qualified to cope with conflicts of interest, it must surely be the legal profession. Solicitors handle such matters every day and they know how to deal with them. Indeed, conflict of interest does not stop solicitors from setting up property centres. I welcome that as competition, but solicitors do not feel that there is a conflict of interest in property centres; that is for their benefit and therefore acceptable.
Where conflicts of interest do arise they can be coped with by regulations of the Office of Fair Trading. There can be proper safeguards and even prohibitions for


handling certain cases. There can be proper warnings, and no difficulties should arise in coping with the problem of conflicts of interest.
If by conflict of interest we mean that people should have independent financial advice, solicitors are not qualified to give that advice or legally responsible for it. Indeed, many solicitors have a vested interest in recommending clients to building societies with which they have a connection and a financial relationship. That cannot be independent financial advice. It is interesting that both Sir Gordon Borrie and Professor Farron, the chairman of the Farron conveyancing committee, have said that the pretext of conflict of interest is ludicrous. That restriction is therefore not fulfilling an honourable promise honourably given, on the basis of which I withdrew my Bill in February 1984. That makes the Prime Minister and the Law Officers look dishonourable.
I would not have thought that the Prime Minister, with her roll of honour which includes Orgreave, the head of Arthur Scargill, Liverpool and all her other triumphs over sectional interests, would want to be seen to be succumbing to the Law Society, however powerful the society and the legal profession may be on the Tory Benches and in Cabinet. The indecent spectacle of the Prime Minister giving way to such interests should not be foisted on the right hon. Lady by any party that has a real concern about her public interest and standing.
The Law Officers are also made to look deceitful. There is now a cloud of corruption hanging over the City, Lloyd's and other financial institutions and over the country as a whole, which resembles an offshore tax fiddle in many financial markets. Do we want that cloud of corruption hanging over the Government because they betray honourable promises, honourably given to an Opposition Back Bencher to persuade him to withdraw his Bill? The Government cannot want that spectacle, but that is exactly what will happen if the Government persist in the restriction proposed by the Lord Chancellor.
Competition by the building societies is necessary to maintain pressure on conveyancing prices to keep the prices coming down, to keep the market covered and to provide better service for the consumer. That provision will come with the same Lord Chancellor. What we are seeing now is a rearguard action and nothing more. Lord Hailsham is not eternal. [Interruption.] My speech might be eternal but Lord Hailsham cannot be.
I should like to make the final point about the selling on of mortgages. It is an innovation from America which is used by local government and which may well be used by financial institutions. Some financial institutions have already displayed interest in the selling on of mortgages as that provides access to capital which, in difficult times of mortgage famine, might be a useful way for building societies to raise money. It is interesting that Barclays bank and the Trustee Savings bank are considering that for their mortgages. The Chemical bank has shown an interest in buying the Alliance or the Bristol and West. I am not sure how it can do that, but there has been interest by American institutions to move into that market.
The Government have stepped in to stop local authorities selling on mortgages in that fashion without the permission of the person who took out the mortgage. That provision is made in the Local Government Bill that will come into effect in two stages, part this year and part next year. That protects people and prevents local authorities from carrying out that practice. It should offer the same

protection to mortgagors with building societies that is offered to local authority customers. One would not want a mortgage shunted off, without consent or consultation, over one's head in the superior cattle trading that goes on in financial institutions.
I do not echo the fears of my right hon. Friend the Member for Halton (Mr. Oakes) about unsecured credit. There is no great harm in more unsecured credit, particularly when that comes from institutions we can trust like the building societies. That is competition and is therefore desirable. That form of unsecured credit is preferable to people falling into the hands of loan sharks or hire-purchase contracts with huge rates of interest. I welcome the Bill because the building societies have done a good job in protecting people and encouraging house purchase. The Bill will allow them to do that in ways relevant to a more modern and dynamic society.

Mr. Eric Cockeram: First, I must declare an interest. I am the parliamentary adviser to the Midshires building society, a society with strong regional links in the west midlands and the north-west. I was a director of the society some years before being returned to this place.
I welcome the Bill, although it does not do everything that one would expect or that building societies want from it. I welcome the Bill because of the contribution that I believe it will make to the nation's housing. I felt that my hon. Friend the Economic Secretary to the Treasury was not as generous as he might have been in his tribute to the building societies movement. It has been one of our great successes since the war. If only other industries had been as successful as the building societies movement. The movement has about 6 million borrowers and 25 million depositors. Building societies overtook the banks long ago as the bankers for the people's savings. Men, women and schoolchildren use the building societies. The societies have been extremely successful, and one of the reasons for their success is that they have proved to be such a safe place for people's savings.
When a building society runs into trouble—happily, that does not happen very often but it has happened enough times to cause us concern—the Chief Registrar of Friendly Societies is called in. He is rather like a fireman, who sits in his fire station waiting for the telephone to ring. If someone telephones the fire station because his house is on fire, the fireman will go out to deal with the emergency. That is the role of the registrar. When he receives a telephone call saying that the Puddlecum-on-the-Marsh building society is in trouble, he reaches for his Bradshaw, packs his bag, and goes to Puddlecum-on-the-Marsh.
Who saves the society? Who puts his money where his mouth is? Who looks after the depositors? The answer is the building societies movement, through the Building Societies Association. The association moves in staff and they reorganise the crashed society, whatever the cause may have been, and look after the depositors. There is criticism about the time that it takes to do that, but the building societies movement has always looked after the savings of the nation in those circumstances. I am by no means convinced that the Building Societies Commission will be any better than, if as good as, the present system in protecting the savings of people in societies where something goes wrong.
There is a second aspect of the Bill which disturbs me. It is expensive for a building society to print, envelope, dispatch and post annual reports to hundreds and thousands of its members. The Bill proposes that a depositor with a holding of £100 or upwards shall be entitled to receive an annual report. I think that the sum chosen is too low and that it should be £250. A depositor who puts money into a bank does not receive a copy of the bank's annual report. A depositor can take his money out at any time. I see no reason why building societies should be under an obligation to send reports to depositors with comparatively small deposits. Of course, any depositor is entitled to demand a copy of the annual report, which should be available in any branch of the society.
I fear that the Bill could lead us into a phase where we see many people being proposed for directorships of building societies and a substantial number of contests. The qualifications required for a director of a building society are experience and ability. I do not want to see what may be likened to political canvassing. I refer not to canvassing by politicians but to canvassing for seats on a building society's board. The public, including depositors, want people with experience and ability; they want people in whom they have confidence. I hope that the limited personal details which have to be circulated, and of which I approve, are limited to that which is proposed. I believe that the Bill goes a little too far in the scale of the details that are enabled to be circulated.
Finally, I support the comments of those who have addressed themselves to the proposals for unagreed mergers. The proposals do not amount to the sort of legislation that I would expect from a Conservative Government. The number of building societies has contracted substantially since the end of the war. About 80 per cent. of them have been subject to merger, and some no longer exist. For every five societies that we had at the end of the war, there is only one left now, and that contraction has been accelerating of late. I do not see that there is any cause to provide a further catalyst to encourage the swallowing up of the smaller regional societies, but that seems to be the purpose of the Bill.
The principle of unagreed mergers in mutual institutions is unprecedented. I do not believe that the Government have made out a case for it. The obligation of societies to make available their register of members to outside inquirers is an abuse of confidentiality and will be seen to be so shortly after the Bill, if it reaches the statute book in its present form, is enacted. Insurance companies and other financial institutions would be glad to get their hands on a list of registered members of a building society. They would use it to canvass those who are known depositors in a society. That is not to be encouraged. I do not believe that depositors wish that role to be undertaken by societies.
We should not permit steps to be taken that will encourage the takeover of the smaller regional society by the larger society. The consumer has a wide choice. The individual can make his deposit in a large national society or in his own regional society. Many people make deposits in more than one society. It is not necessary for us to provide a catalyst for further mergers. It should not be made easier to distribute the reserves of a society after an unagreed merger than would be the case with a corporate conversion, but that will be one of the effects of the Bill.
I support Second Reading. Like others, I hope to be a member of the Committee which considers the Bill. I give notice to my hon. Friend the Economic Secretary that there are parts of the Bill that I should like to see amended in Committee.

Mr. David Penhaligon: I do not know how many Second Reading debates I have heard introduced by various Ministers over the past 11 or 12 years. I listened to the speech of the Economic Secretary to the Treasury and it was clear. The Minister was articulate, and it was obvious that he had given much thought to the Bill. However, when he resumed his place I was unaware of the Government's aim in introducing the Bill. I have heard Ministers introduce Bills with aims with which I agreed and there have been Bills introduced with aims with which I have disagreed. In this instance, the Minister seemed to have no real aim. He was not claiming that reform was required to retain building societies in our nation.
The Economic Secretary advanced a number of reasons for the Bill, some of which were amusing. Many Members smiled when he talked about balloting for mortgages. That did not seem to be a strong enough reason for introducing such an enormous Bill. The reasons that he gave for changes being required are hardly ever heard mentioned, or are never mentioned, by the societies.
During the time that I have been in this place I have rarely found myself more in accord with the speech of the Opposition spokesman. The hon. Member for Thurrock (Dr. McDonald) seemed to share my feeling about the Bill. The building societies movement is working extraordinarily well. There may be a case for some changes, but are we not digging up the roots, which have provided life for so long, to see whether we can make the plant grow quicker when we probably cannot achieve that end?
Of all the institutions that are of real value to our constituents—let us declare that they are of interest to us—it is difficult to think of one that has served us better individually, collectively and on a constituency basis than the building societies movement. The building societies have done a superb job, and it is right to put that on record. In considering the details of the Bill, I shall look with a jaundiced eye on anything that casts even a shadow of doubt on the building societies' successful role.
Some hon. Members have referred to the takeover system which, to put it mildly, seems to be rather peculiar. Clearly, there is a case for allowing building socities to merge if they wish. I do not want mergers to continue until all the small societies have been eradicated. Some of the building societies serve a useful purpose in their local communities, as at least two hon. Members have said I do not see why we should make this compulsory unless building societies are or are likely to be in financial difficulty. As I understand it, a small building society which is doing no one any great harm can be taken over against its will by one of the massive building societies, with all of its capacity to advertise and argue. That small building society can be forced to hand over a list of all its members and depositors to enable a ballot and direct mailing to take place. With some limitations, details of which I find difficult to interpret, the large building societies would be able to offer a bonus to the depositors in the small building societies to obtain their votes. Some years ago, Parliament outlawed the practice of offering


financial inducements to obtain votes. I have honest doubts about this measure, but I shall listen to the detailed arguments before I condemn it absolutely.
My sole criticism of the building societies is their endless desire to increase the size of their empires and set up offices in every town. It is not uncommon when travelling to any part of the country in a political or other role and talking to local people about their town to hear people say that everything has been taken over by the building societies. That is not unique to Cornwall or to Northumberland. There is a general feeling that the building societies have been a little too anxious to increase their empires and to think, for prestige reasons, that they must have branches everywhere.
The Bill could provide a new method by which the building societies could expand their empires. That might be done even more cheaply. I suspect that the capital value of the properties owned by the smaller societies is much more, in terms of hard cash, when placed under the auctioneer's hammer than the book value. I remain unconvinced, although I am not paranoid about this issue.
Hon. Members have received a brief from Abbey National stating that the society believes that it should be able immediately to start lending up to 10 per cent. of the money deposited with it and that the amount should be increased to 20 per cent. "in due course." I suspect that "in due course" means "quickly" if the Bill is passed by the House.
I can see that there is some advantage in having another avenue through which people can obtain credit by way of competition. They would be able to obtain the best deal they could find. I wonder about the thoughts behind this proposal, when a building society the size of Abbey National tells us that it wants one fifth of the hundreds of millions of pounds in its care to be used for the purchase of refrigerators, washing machines, beds, Japanese television sets, and so on. The building societies claim that that will allow them greater freedom, but they do not say that there will be a great economic advantage to the country. I can go along with the idea that extra freedom will be provided, but I am worried about the proposal to increase the proportion to 20 per cent.

Mr. Tim Smith: The 20 per cent. limit which Abbey National wants would cover not just unsecured lending, but all the other new activities envisaged by the building societies. If building societies are to invest in those activities, a considerable amount of capital will be tied up in them. I do not think that anyone is suggesting that the whole lot will be used for unsecured lending.

Mr. Penhaligon: I realise that. I have some time for the other activities in this category. I have found that the societies seem to be interested in the direct credit proposal. They will be in the fortunate position of being able to select with more skill than most the very best of creditworthy customers to whom to lend money. One suspects that they will be able to gather unto themselves some of the best businesses in a particular area. I have gathered from my conversations with building societies that some see themselves going in for consumer credit in a big way. I do not know what the legal definition of "consumer credit" is. I am not arguing with the hon. Member for Beaconsfield (Mr. Smith) about what politicians would call "consumer credit."
I listened with interest to the hon. Member for Great Grimsby (Mr. Mitchell). I recognise his valuable work,

but I am not sure that he has reached the correct conclusion. I am an engineer by training, which perhaps makes me as independent as I can be. I am neither a lawyer nor a financier, which is perhaps an advantage in this debate. I am not a lawyer, so I just listen. The hon. Member for Great Grimsby argued for the general expansion of conveyancing, which I applaud. It is proposed that the building societies will offer a portfolio of services but will not be able to offer all the services themselves. They will, in effect, be forced to send a person who comes to borrow money for the purchase of a property elsewhere for conveyancing. The logic behind that argument is that people could obtain independent advice.
The hon. Member for Great Grimsby accurately said that one of the new phenomena resulting from 64 per cent. owner-occupation—a wonderful statistic—is that many of the people who buy houses are not prepared to do so by family tradition and advice and perhaps by what the hon. Gentleman calls "middle class expectations". In that case, it is important for the people who are buying a property for the first time—when there is little easily obtainable advice around them—to be able to obtain some genuinely independent advice. The hon. Gentleman's point was that some of the advice that they now obtain is not independent because of the unofficial link between building societies and solicitors. There may be some truth in that. Unless the Bill includes a clause to that effect, any hope that independent advice will be provided for the most vulnerable section of buyers will cease. The Government have a considerable amount of logic on their side.
In my community there is the phenomenon of Mundic block houses—concrete block houses built in the 1920s when tin mine waste as opposed to clay mine waste was used. That waste contains a chemical that attacks cement over 20, 30 or 40 years. The simple hard-nosed truth is that properties built with that product can fall down because it turns to dust. It is difficult to find anyone who will take responsibility for one of those properties. When a house is declared "Mundic", it is the kiss of death. If that label is put on a property, a zero can be knocked off the value.
I am well aware that independent advice is crucial to people who are making what is usually their biggest ever financial transaction. By all means let us have competition and freedom, but let us ensure that ordinary, honest people can obtain the best opportunity at the most opportune moment.
I believe that we will all receive many more briefs from the building societies during the Bill's passage. I should appreciate it if the Minister would again go through that part of his speech in which he outlined the aims behind this substantial piece of legislation. I hope that the Government are not going to contract the biggest of all parliamentary diseases—that because something has not been legislated on for a long time, now is the moment to do so. I look forward to a further description of the Government's aim.

Mr. Robert McCrindle: My approach to the Bill is different from that of other hon. Members who have spoken. I should like to start by extending a general welcome to the Bill and in the process to pay tribute to the building societies for the service that they have given to both lenders and borrowers over a Long period. In the mind of the ordinary person, they have brought about a perception of integrity and probity. It is


only fair to say that a number of financial institutions have been rather less successful in that regard. However, it is now time to update the basis upon which the building societies operate, to allow them to make a greater contribution to solving the housing problems and to enable them to operate wider financial services than they are permitted to do at present. The underlying caveat to all that is that they should be permitted to do so in fair competition with others.
Speaking as a building society investor and an erstwhile borrower, I welcome a good many aspects of the Bill. By a tidying-up process, I hope that we can look forward to such improvements as an end to early redemption penalty clauses, as I believe they are called. Such clauses, it seems to me, make the transfer of a mortgage more difficult, and make flexible lending just that little bit more difficult than it need be.
Speaking as the parliamentary adviser to the British Insurance Brokers Association, an interest which I now readily declare, I think that the provision of all financial services by the building societies which they are now being enabled to engage upon should be subject to the same stringent controls as is the rest of the financial sector.
It is significant that we are debating the Second Reading of the Bill on the same day that the Financial Services Bill has been published. I think that it is crucial that the same level of protection be extended to the consumer when the building societies are enabled to move into the insurance broking sector. I believe that the very trust which people have placed in building societies, and to which I referred at the beginning of my speach, tends to lead to an assumption of expertise which in my experience is not always present in insurance at the average branch office of a building society. I very much accept and welcome the development of organisations providing a range of financial services and, in the interests of the consumer, I hope that the House will agree that they must be subject to appropriate regulation in relation to the individual services.
With regard to insurance services, the only regulation current in operation which places considerable responsibilities upon practitioners is the Insurance Brokers (Registration) Act 1977. In the proposed financial services legislation, self-regulatory organisations are to be created, which, if anything, will toughen the requirements under which insurance broking is undertaken. Under the Bill, it appears that the building societies are not to be subjected in this field of endeavour to the same level of consumer protection that is now expected of the Insurance Brokers (Registration) Act, or that will be expected of them if and when the Financial Services Bill is enacted.
Can the Minister tell me why the Green Paper proposal that new insurance services should be subject to the existing regulatory regime for insurance broking—that is to say, the provisions of the Insurance Brokers (Registration) Act—has been dropped? I wonder whether the very high repute in which the building societies are held will tend to lead people who now are likely to purchase insurance to a greater extent through their local building society branch to expect a level of consumer protection which is not necessarily involved in the Bill as drafted. I look closely at the proposals in the Bill for protection of building society investors. Unlike some of my hon. Friends, I take no exception to what is

proposed, but it seems to me that the level of protection offered to customers in the ancillary services into which the building societies are now being encouraged to move is less substantial than the protection offered to those who place their money only as investors in the building societies.

Mr. Ian Stewart: My hon. Friend is suggesting, I think, that there would be less supervision on building societies carrying out functions for insurance agents and so on than there would be on others in the same market. That is not the case. Building societies would be subject to the same provisions of the Financial Services Bill as anyone else.

Mr. McCrindle: That is a good assurance to have. I have to confess that I have not had the opportunity which my hon. Friend clearly has had to wade through the 165 clauses of the Financial Services Bill. If he is giving me the assurance that, after both Bills are enacted, an insurance broker and a building society offering insurance broking services would have to provide the same level of consumer protection to the customers, that is the assurance which I am seeking. If that is what he is telling me—he appears to be indicating assent—a good deal of the concern that I have been expressing can, indeed, fall away. What I seek is fair competition, adequate control, appropriate expertise and proper redress. If those exist when insurance is purchased through a broker, and if my hon. Friend is telling me that they will similarly exist when insurance is purchased through a building society acting as an insurance broker, that is reassuring.

Mr. Christopher Hawkins: I do not know whether I am correct, but from what I have been told, I believe that the Financial Services Bill does not cover people buying private insurance for a house or motor car. My hon. Friend might like to bear that in mind when accepting the assurance.

Mr. McCrindle: Yes, indeed. One of the things that I noticed—indeed, it was the basis of my intervention in the Minister's speech—is that, although it is a happy fact that there is to be no conditionality in relation to the provision of a mortgage—in other words, a building society will not be allowed to require a customer to place an insurance through the insurance broking subsidiary of a building society—there is no such undertaking in regard to the other areas into which the building societies are being encouraged to move.
I have to say to my hon. Friend the Minister that, although I welcome his intervention, which allays some of my anxieties, there remain some areas in which the fair competition for which I have called seems to be not entirely to the fore. In this area, amendments may be expected in Committee.
I wish to draw to the attention of the House a remarkable omission from the Bill. Nowhere in its pages can I see any reference to the creation of an ombudsman. A noticeable development in recent years in several spheres of financial services is the evolution of the office of an ombudsman. In insurance there has been an ombudsman for a considerable time, and I pay tribute to its enormous success. There is to be an ombudsman in banking also. If I have a choice of effecting my mortgage through a building society, a bank or an insurance company, it is remarkable that in two cases I am to have


access to an ombudsman, but in relation to building societies I am not. I wonder whether some consideration might be given to the desirability of this system. It appears to be here to stay, it has now been proven, particularly in insurance, and it is now trusted. That is why it is being extended to banking, and I believe that building society customers should have the same right.
I repeat that, in general terms, I welcome the Bill. My single reason for addressing the House was to see whether the same level of competition was being encouraged on insurance being sold through insurance brokers, through insurance broking subsidiaries or through building societies. I am grateful for the partial assurance that my hon. Friend the Economic Secretary has given, but there are still points to be covered, to which I shall return in due course.

Mr. Ken Weetch: The Bill contains few surprises because all the principal issues in it have been well canvassed over a long period in both Government policy and discussion documents and in two recent speeches by the Economic Secretary to the Treasury.
The Bill is long overdue, and for a number of reasons. In the first place, building societies have long outgrown their current legal framework. The Act that governs them is the Building Societies Act 1962. There was nothing new in principle in that Act, because it was based on the same set of principles as the Building Societies Act 1874. Now, in 1985, even in terms of self-help, we are a world away from what society was nearly 100 years ago.
In the second place, the market in which building societies have had to operate has changed because the current financial market place is much more fiercely competitive than ever before, both in the supply of mortgage finance and in the competition for savings. In addition, the structure of financial institutions has altered. Until now, there has been a highly structured system with clear lines of specialist demarcation. We now see many more multi-purpose financial conglomerates emerging. All this has been aided and abetted by the Government's policy on fiscal neutrality between financial institutions. The world has altered and therefore the Bill, which will be on the statute book before summer, is long overdue.
One of the reasons why I look as I do is that I have read every building society debate that has taken place in the House since 1874, and they all have one thing in common. I am sorry to say it, but building societies have always been regarded with a completely uncritical eulogy in which I do not join. I agree that they have done wonders for home ownership, and all credit to them for that, but for far too long they lived in a sheltered world where the only attention that they wanted was of that uncritical eulogy. It was a closed world in which directors did not need, and were not equipped with, entrepreneurial skills of any kind. They were also a self-perpetuating oligarchy with well-used procedures of co-option from among golf club cronies. They usually reserved their energies to keep new blood off the board. I have fully assessed that close interest. In the past, the Anglia and the Nationwide, to name but two, manipulated the rule book to keep genuinely elected members off the governing body, and thereby made a mockery of mutuality.
For many years, the cartel set borrowing rates and lending rates and boards sat comfortably in between. For a good many years, any rocking horse could have been a

director of a building society—all they had to do was to avoid financial risks and to keep the books straight. In the cases of the Grays building society, the Wakefield building society and others, the directors did not even have to do that, so weak were the financial procedures.
That is a matter of history, and I make no comment on it. The building societies failed to use their considerable financial clout on behalf of their customers because they connived in and underwrote some of the worst professional restrictive practices in the housing market. However, that is history, times change and the more modern generation of managers and directors have, to their great credit, tried to come to grips with the modern world.
What are we saying about the Bill? Subject to the detailed process of scrutiny and amendment in Committee, the Bill should be supported in principle, because its major aim is right. It is to allow building societies, subject to proper safeguards, to provide a greater range of services for their members, and that is a correct strategy. It is also prudent to do this while keeping the building societies' purpose in the main stream of mortgage finance and owner-occupation.
The legislation is not concerned with what the Government, the bank or the building society directors want. What the punters want is the main point at issue. Building society members want and would welcome an expansion in the range of services. Over the years, as I have gone down to my constituency surgery every Saturday I have seen the queue of people waiting for money transmission services in front of the building society grow and grow. Many people want more money transmission services in building societies.
Building societies have the capacity and confidence of the public that enables them to develop such services. Many consumers look forward to the opportunity of having a package of housing services from under one roof. However, I must say a couple of words of warning to the Government. At this stage of the argument the warning is one of principle that the caution that they have rightly used may be overtaken by events in a rapidly changing financial world. I am speaking particularly about the merger provisions in the Bill and the controversial question of building society takeovers, and even more particularly about the takeover of small building societies by larger ones. The matter could go even wider if public limited companies are formed and normal commercial company practices are not followed.
I was pleased to hear the Economic Secretary offering some additional safeguard. At least he is prepared to do so. The implication of what he said was that he would speak further on these issues in Committee. The last thing that we want to do is to unleash any speculation that would make small building societies pawns in a financial game. That would be bad.
Building societies have always had a deserved reputation for soundness, respectability and public confidence. We do not want the seemingly sleazy edges of current City financial morality to invade sections of the building society movement. Are the safeguards the Bill adequate? Outside the House there is a lot of doubt about that.
East Anglia is the home of small building societies which have a few branches but which have a lot of local knowledge and flexibility. They do a great service for the local communities in the difficult area of accumulating savings. My hon. Friend the Member for Thurrock (Dr.


McDonald) used the quotation which I intended to use from the Financial Times of 7 December when the deputy general secretary of the Building Societies Association, Mark Boleat, warned that there were predators in this area of activity. Many smaller building societies in Britain are worried about the future state of the movement. I quote from a strongly worded letter from the Ipswich building society, which is one of the smaller building societies:
It will give access to the register of members to any other building society and this we consider will create a dangerous situation. It may well be that where a small society has high reserves it would enable the much larger society to make offers to members of bonuses as an incentive for a merger and one can see a situation quickly arise where no matter what restrictions are placed on the type of takeover that they would be insufficient to provide any safeguard.
I emphasise to the Minister that that same warning would be given by most smaller societies in Britain and I hope that he will take it seriously. Does the Minister have any vision of the future shape of the building society? Has he any idea of what he wants it to be? It is not in the interests of the building society movement to be dominated by a small number of large societies. It would be unhealthy and would reduce the competitive framework of the movement.
The building society framework should have as much variety as possible. I am not averse to some building societies converting themselves into public limited companies. If we do not try that form of organisation, we shall never know whether it has any advantages. Some societies could remain firmly rooted in the mutuality principle whilst other large societies could evolve new ideas. Some societies—not very many, I hope—could evolve into public limited companies.
The building society movement will run into difficulties right from the start because it is entering a new area of financial management of which it has had no experience. It will be difficult, in the short run, to recruit the financial expertise to cope with the new skills demanded within the new areas of risk that some societies will undertake. Is the Minister optimistic that the building society movement will be able to recruit the necessary expertise as it enters into engagements and activities in Europe? Will such recruits be able to undertake this type of business successfully, especially in the short run? There are doubts about that.
I pay tribute to the registry and the current registrar for the improvements in supervision and control which have been brought about in recent years. I have been a Member of Parliament for 11 years and in that time I have taken a close interest in the registry and how it supervises building societies. There have been occasions when its supervision has been amateurish and not of the professional standard to which we are entitled. I hope that the new commission will be adequately funded and that it will not be a dustbin where all the old lags can find jobs. I hope that the registry will be a highly professional and commendable organisation when dealing with new areas where there will be new problems. The investors' protection scheme will need considerable improvement.
It is encouraging that the Minister has been given a fair wind for his Bill on Second Reading, but a difficult voyage lies ahead in Committee.

Sir Hector Monro: It is a pleasure to follow the hon. Member for Ipswich (Mr. Weetch) after his thoughtful and interesting speech, based on much historical research.
It is good to know that he gives the Bill a general welcome. However, the hon. Gentleman's overall criticism of building societies being out-of-date is unfair. Many of the societies have competent management. I agree that among the 190 building societies there are bound to be some black sheep. The dramatic fall in the number of building societies in the past 10 years from over 400 to 190 may be due to the disappearance of those societies which, in the view of their members, were not well managed. The hon. Gentleman asked how many building societies we would have but that is anybody's guess. The rate of decline in the number of building societies has dropped, and I should be surprised if the figure did not settle down.
I declare an interest in a building society and I certainly welcome the Bill. It pays a warm tribute to the building society movement, which is one of the successes of the century and which has brought home ownership to millions of people. It is right that the Government should move forward with the Bill. Societies should have an opportunity to evolve and adapt to rapid financial changes and the Bill enables them to move forward much faster than under present legislation.
In introducing the Bill, my hon. Friend the Economic Secretary to the Treasury showed the value of detailed consultation. My hon. Friend has worked very hard in the past two years and he has met many societies and the Building Societies Association. For this reason we now have a Bill that has received general welcome throughout the House.
The Bill has four main themes. The first is the removal of many restrictions on lending. The second is a widening of the range of services to bring in Europe, cheque cards, insurance, and the management of land and houses, which will bring the societies into a much closer relationship with the housing associations. We should commend the building societies that have made a special effort to provide accommodation. For example, Abbey National has done much restoration work in Edinburgh. Other societies throughout the United Kingdom have done much to raise the standard of building and show what can be achieved with competent management. The third theme is a strengthening of the safeguards within which building societies will operate. The fourth gives new rights to members and the opportunity to play an active part, which I am sure will raise the eyebrows of many building society managers.
Those are all highly commendable objectives. There is no doubt that, with a Bill of 120 clauses and schedules, the Committee stage will be a gargantuan task. However, the welcome that it has received so far should mean that the Committee stage will not be intolerably long, although many matters are bound to be discussed.
One matter that causes some anxiety is the freedom for market competition. Any competition with the banks must be seen to be fair. Building societies and banks will operate in the same market, yet the building societies will be restricted at first to using no more than 5 per cent. of their total assets. I know that the figure is likely to be increased to 10 per cent. in the foreseeable future, but even


that is too low. Perhaps on reflection the Government will consider starting at 10 per cent. and working up to 20 per cent. Only then would we reach something approaching fair competition. If we do not have such competition, a bull point of the Bill will fall by the wayside.
The freedom to convert to company status is likely to occur only rarely. I do not envisage a flood of applications to change from society to company status, unless the restrictions on the societies are far too tight for them to operate in the changing world of the 1990s. The Government recommend a procedure in the Bill, but the major societies believe strongly that the voting requirements for their millions of members are unrealistic. If that is the only route to company status, surely a simple majority of two thirds of the investors and borrowers in a society would be more appropriate than the complicated system in the Bill.
The key clause deals with the freedom to manage, because the key to a successful building society is the quality of its management from the top down to the counter staff. Many societies have introduced computers, cash dispensers and different business management processes, but at the end of the day building societies thrive because of the personal service that they provide to their customers. That management skill must not be put at risk because of a little coup dreamed up at an annual general meeting, where a small group of members could elect someone unsuited, unqualified and lacking in experience. Management could be at risk if we accepted the proposal in the Bill for a minimum investment of £100 and the support of 10 other members to nominate a candidate. Those figures should be substantially higher—perhaps £300 and 50 members—so that no inexperienced or bizarrely qualified candidates can be nominated or elected.
I welcome the Bill and hope that it progresses quickly through Committee. But during its passage and in the future, we must remember that the Government must continue their economic policy with the prime purpose of keeping down inflation. If they do, we shall have lower interest rates, which the building societies want. After all, lending for house purchase is their prime objective. The lower the interest rates, the more likely they are to achieve that objective.

Mr. Jim Craigen: As the hon. Member for Dumfries (Sir H. Monro) said, this is a sizeable Bill. He may be over-optimistic about the time that it will need in Committee, because it is a big Bill about a movement that has had a large influence in the shaping of the social condition of our citizens and the housing conditions of our communities. I agree with my hon. Friend the Member for Ipswich (Mr. Weetch), who is not known for his uncritical approach to building societies, that we must overhaul the current legislation. However, I am wary about the methods and means of doing that and the likely outcome of some changes.
Like most hon. Members, I am a borrower and an investor in a building society, and, with my right hon. Friend the Member for Halton (Mr. Oakes), I should declare that I am an honorary vice-president of the Building Societies Association. That post is not financially remunerated.
With the hon. Member for Dumfries, I hope that the importance of mortgage interest rates will be highlighted in Committee. The liberalisation of existing building

societies legislation should offer the prospect of cheaper mortgages. It is not simply a matter of improving arrangements for house purchasers: at the same time, we must help members of building societies by the extension of services available.
On classes 2 and 3, I part company with the hon. Member for Dumfries, because I am worried that liberalisation may result in an exodus of resources for house purchase in the United Kingdom as against the availability of such resources in Europe and elsewhere. I can understand people wishing to go to the Continent because of our unemployment problem and our general economic climate. But I hope that not too many holiday homes and retirement homes will be financed from building society deposits that might otherwise go to the regeneration of our inner cities and to the fulfilment of the hopes of those who simply wish to purchase properties in the United Kingdom. The European Community directive on the harmonisation of mortgage credit is forcing the Government in a certain direction. However, I am wary about the exodus of funds from the United Kingdom. The Economic Secretary to the Treasury referred to the primary purpose of building societies and suggested that the legislation will lead to diversification. But the primary purpose of building societies is to encourage home ownership. I hope that that primary purpose will not be deflected becauuse some societies believe that they can get a higher return on capital by investing in high risk areas. If too much speculation of that kind takes place, the Building Societies Commission will be very busy.
I share the misgivings of the hon. Member for Rutland and Melton (Mr. Latham) about the rationalisation of building societies. In some circumstances, larger societies can provide larger services on a more economic scale if they are well managed, but there is nothing to prevent smaller building societies from providing an excellent service for their members. This is a remarkable period. We are living in a takeover society. Private sector takeovers now occur on a very considerable scale, but they do not help to improve the productivity of industry. They merely increase the profitability of some of those private companies that are engaged in takeovers. I hope that competition will not be squeezed because of rationalisation and the considerable cannibalisation of existing building societies.
I know what has been said by all the leading lights about mortgage interest relief. That is not a matter for this legislation, but the availability of mortgage interest relief creates the general climate in which building societies operate. The Fowler reviews of housing benefit, the cuts that are to be made in social services and the pressure that the Government have exerted on rent levels have swung the balance very much against those who, perforce, have to rent property. Instead of exhibiting fiscal neutrality, the Government constantly display fiscal partiality in favour of the home owner.
It is right that those who pay the standard rate of income tax should be eligible for mortgage interest relief. However, it is quite wrong that those who pay a higher rate of income tax should benefit above that from mortgage interest relief. If the Government were to move in that direction it would reduce house prices and thereby increase the opportunity for people to purchase their homes. The Government may find that their social security policy leads


inescapably to the logic of doing away, over a five or 10-year period, with mortgage interest relief for those who pay higher rates of income tax.
My hon. Friend the Member for Ipswich referred to the accountability and control of building societies. I need not, therefore, deal with that point, apart from saying that the Building Societies Commission may have to spend more time dealing with the small building societies simply because the larger building societies have larger audit departments. Although many building societies began life as local societies in, say, Halifax, Woolwich or East Anglia, their activities now spread from Lands End to John o'Groats. That leads to special problems about mutuality. It also leads to the problem that shareholders may be unable to attend the meetings of public limited companies held in London or elsewhere, although they would like to take part in them.
The Government have published a Green Paper on home improvements. I am glad that it relates only to England. I hope that the Secretary of State for Scotland has forgotten all about publishing a Green Paper on home improvements in Scotland, because I do not particularly like the contents of the Department of the Environment's Green Paper. My impression is that the building societies were not involved in the Green Paper consultations. I hope that the Parliamentary Under-Secretary of State for the Environment will dispel that misapprehension.
The building societies have a considerable role to play in the regeneration of the inner city areas. I hope that the development of partnerships between building societies and local authorities for the regeneration of the inner cities will be encouraged. People do not simply buy their homes; they buy a stake in their community. They are concerned about their immediate environment as well as about a roof over their head. Therefore, it is important that the building societies should be able to play a full part in helping communities to improve the environment. Home owners should feel proud of their environment.
Will the Under-Secretary of State say why Scotland is excluded from the provision for conveyancing services in clause 101? Scottish lawyers need to be watched just as much as do English lawyers, so I hope that the Under-Secretary will refer to that point.
Reform and overhaul of the legislation that governs building societies is now overdue and the Committee stage will be crucial. We must ensure that the right kind of development is encouraged and that social conditions and housing standards are improved. We must beware of some of the fashionable distractions that have emerged from certain quarters. They seek to divert resources that ought properly to be invested in bricks and mortar and in the environment.
It is all very well that the building societies should be able to do this, that and the other, and it is all very well that we are blurring the distinctions, but there is much to be said for knowing that a building society is a building society and not a bank, a financial society or something else. There comes a point when the distinction becomes so blurred that nobody is very clear about what is meant. During the Committee stage we shall try to pin down the Government in order to ensure that what emerges is better than what we already have.

Mr. John Watts: I was concerned, before the publication of the Bill, about the basis on which building societies would be allowed to undertake conveyancing work. I feared that a conflict of interest could arise if an employee of a society was also allowed to undertake conveyancing work on behalf of the borrower from the society. I am pleased that building societies are to be permitted to compete for this work, but it is right that they should be excluded from undertaking conveyancing for those who borrow from them. The right hon. Member for Halton (Mr. Oakes) asked where a conflict of interest could arise, and his hon. Friend the Member for Great Grimsby (Mr. Mitchell) pooh-poohed the idea that any conflict could possibly arise.
After a lengthy meander along the Cornish country lanes, I found myself in agreement with the hon. Member for Truro (Mr. Penhaligon), who made the valid point that if we were not careful the package could be so comprehensive that the most vulnerable in house purchase might never receive any truly independent advice at any stage.

Mr. John Mark Taylor: Does my hon Friend accept that advice is seldom of the best or the most impartial or most helpful if it comes from someone who is at the same time lending the money?

Mr. Watts: My hon. Friend makes a powerful point.
The right hon. Member for Halton wondered where a conflict could arise. He said that the building society and the purchaser had the same interest in establishing good title to the property, and he described that as self-evident. I immediately began to wonder about the terms of the mortgage advance—the point raised by my hon. Friend the Member for Nottingham, North (Mr. Ottaway), who referred to the severe penalties which some societies impose for the early redemption of mortgages.
Does the right hon. Member for Halton or the hon. Member for Great Grimsby believe that a solicitor employed by a building society would point out to a borrower that the terms on which he was being offered the loan were onerous and that he should consider looking elsewhere? That is only one example—I am sure that I could think of others—where a possible conflict of interest could arise. The Bill gets the balance right on that point.
I did not intend to concentrate on the question of conveyancing. Like my hon. Friend the Member for High Peak (Mr. Hawkins), I welcome the Bill because it permits building societies to make an even greater contribution to the development of a property-owning democracy in Britain. The creation of such a democracy is a longstanding Conservative objective. It has been a slogan from the 1950s onward. The Conservatives, since being elected in 1979, have done the most to turn that dream into a reality for hundreds of thousands of people. We need look no further than the right-to-buy legislation to realise the truth of that. Nearly 900,000 new home owners have moved from council and other public sector tenancies into home ownership. I welcome the further proposals for extending or improving the right to buy to the sale of flats.
The concept of a property-owning democracy does not centre solely on home ownership. The programme of privatisation and the encouragement of wider share ownership are also important in this context, and a


provision of the Bill will allow building societies from their high street shops to offer some facilities for the sale and purchase of shares. That is a further welcome improvement, although it is a small part of the Bill.
There is no doubt that home ownership remains central to anyone's idea of what a property-owning democracy is about, and policies that encourage the further growth in home ownership are in tune with the wishes and aspirations of the vast majority of our citizens. It is interesting to note that since 1979 the level of home ownership has risen by 1·5 million, including those who have become home owners under the right to buy. Continuing to provide further means of promoting wider opportunities for home ownership should remain at the forefront of our housing policy.
While there has been enormous and commendable progress in facilitating the conversion of council tenants into owner-occupiers, there has been a gap in the total strategy, for the right to buy is not of itself a comprehensive home ownership policy. The gap exists because there has been no effective help available for those not privileged enough to enjoy a public sector tenancy which they can convert into home ownership—people who do not have the means of getting their foot on to the first rung of the ladder of home ownership.
I concede that the figures for the growth of home ownership outside the public sector show that there are still substantial numbers of individuals and families who are able to move into home ownership without any further assistance. That is not to say that it is easy for them or that they can do it without accepting a period of financial hardship. It was ever thus. No doubt most hon. Members have been through those early years of bearing the heavy burden of a mortgage.
My concern is for those who aspire, with the vast majority of their fellow citizens, to home ownership but whose incomes are too low to finance a conventional house purchase—those who find home ownership just outside their grasp at every stage. As their incomes and savings rise, so do the prices of houses, which are always just that bit ahead for them ever to turn their aspiration into a reality.
One of the best solutions for that group, for whom conventional purchase is difficult, is the further development of shared ownership. I speak from personal experience about that, from my six years as leader of the London borough of Hillingdon, where in 1978 we inherited a building programme of 900 houses and decided that our priority was to extend opportunities for home ownership. We offered those houses under construction for sale, with priority to our existing tenants and those on the waiting list who wished to become home owners, and we gave the option of shared ownership.
Over half of those houses were sold on shared ownership terms. The scheme was so popular that queues began to form outside the civic centre in Uxbridge two or three weeks before the date on which the properties were to be released. To avoid the difficulties and hardships of such long waits, we moved to a balloting system—ballots not for mortgages but for houses—as the only equitable way of determining who should benefit from the limited supply of houses that were available under the scheme.
We found almost without exception that purchasers opted to buy the maximum that they could afford. Even though we allowed a minimum of a 50 per cent. stake in

a flat or as low as a 30 per cent. stake in a house, people bought the maximum that they could afford. They did not look on shared ownership as a means of paying a minimal premium to get themselves into rented housing. They showed that they wanted to become home owners, and that scheme—part buy, part rent—enabled them to achieve it.
Shared ownership schemes continue to be offered by some local authorities and building societies, but on nothing like the scale that is needed to meet the potential demand. I was sorry to see the demise, because of lack of funds, of the do-it-yourself shared ownership scheme, which operated on a pilot basis a few years ago. It is right that the priorities for public sector housing investment should be improved maintenance and improvements to bring properties up to a better standard, not necessarily in new build or shared ownership, although those are imaginative schemes. I would hold a slightly different view if it were essential that funding had to come from the public sector, but that is not the case.
The Bill makes a major contribution to the development of shared ownership by empowering building societies to participate fully in such schemes. I hope that societies will take full advantage of their new powers, thus extending opportunities for home ownership to a large and new market of potential home owners.
Slough has a housing shortage that arises as a consequence of its economic success. Our unemployment rate is only 6·8 per cent.— the ninth lowest in the country. Skill shortage is the major problem facing companies in Slough. In a recent survey, 82 per cent. of local companies reported difficulties in recruiting skilled labour. Skill shortage is acting as a brake on the further economic growth of companies in my constituency. Slough has had skill shortages in the past. The traditional solution has been to import skilled labour from other parts of the country, but that solution is no longer available, principally because of constraints on housing.
The wider availability of shared ownership schemes and index linked and equity mortgages provided by the Bill could provide substantial help for unemployed skilled workers from other areas who are at present prevented from seeking available jobs in Slough and in other parts of the Thames Valley because of their inability to find a house to rent or to buy. I have in mind especially those who face the substantial gap between the value of a house in, for example, Newcastle and the price that they would have to pay for an equivalent or smaller house in my constituency. Shared ownership is one way in which that problem could be overcome. It could facilitate moving to where the jobs are and where business needs those skills. That would be good for business and for the unemployed.
It is right that the Bill establishes at the outset a limit on the proportion of lending in the non-traditional areas. I welcome the fact that the Building Societies Commission has the power to raise the ceilings. I hope that my right hon. and hon. Friends on the Treasury Bench will not be slow to amend the legislation, should that prove necessary, when we have had some experience of the legislation in practice. I believe that such amendments could be necessary, because shared ownership will become an increasingly popular form of tenure for first-time buyers and for those who are forced to move round the country for employment reasons.
By increasing access to home ownership a substantial new market will be opened up for house builders. Far more


opportunities could be created under that scheme than through the old-fashioned and discredited policy of pumping more and more money into public sector housing.
The Bill provides for the hopes and aspirations of thousands, if not millions, of would-be home owners to be met by the private sector through the magic of the market.

Mr. Peter Pike: The hon. Member for Slough (Mr. Watts) referred to the shortage of housing in his constituency. That is not a problem in Burnley, where there is a surplus of housing stock in the private and the public sectors. That does not imply that we do not have a housing problem—insufficient finance has created one. The growing divide between the north and the south is illustrated by the empty housing stock. So many people are leaving the area, as they did in the 1930s, because of the lack of employment prospects.
I shall follow the general tone of the debate. Most hon. Members have broadly welcomed the principle of the Bill. However, like many hon. Members, I have reservations about aspects of it. Unfortunately, unlike some hon. Members, I will not be able to serve on the Committee because I am already serving on the Standing Committee that is considering the Gas Bill. However, I shall be closely watching the progress of the Bill. I intended to consider it on Report and on Third Reading. I believe that some changes are needed and I would support some of the changes that have been proposed, but I would be unhappy if other changes were made in Committee.
I accept that building societies need to make changes and it is important that they should meet the demands of the customer. I accept that there is a need for building societies to move into the area of unsecured loans. I am not averse to the 5 per cent. limit in the initial stages, which has the ability to rise to 10 per cent. Many hon. Members may forget how recently high street banks went into unsecured lending. When I first left school and worked in a bank more than 30 years ago, most banks did not lend on an unsecured basis. The Midland bank, for which I first worked, was the first bank to introduce personal loans. I recall that when the Midland bank went into personal loans, which was the biggest growth area of unsecured lending—long before the days of credit cards—the other banks frowned upon that departure and the financial institutions in the City condemned it. Noticeably, the other banks rapidly had to follow the example set by the Midland and made personal loans available.
The need for a limit to be fixed does not arise from the fact that building societies would get into financial difficulties, because they will have to consider carefully any application for unsecured loans. My worry is that, if too much money is used for unsecured lending, there will not be enough funds available for their main function—extending home ownership and assisting people to buy their own home.
My constituency has a long tradition of building societies, which is one reason why home ownership in Burnley is well above the national average and above the figure of 64 per cent. that has been mentioned this afternoon. Building societies have had a long tradition of service to the country and they have played a major role in extending the growth of home ownership. That is shown

clearly in my constituency. Until two years ago we had the headquarters of the Burnley building society of which we were very proud. Many people in Burnley regretted the merger of that society with the Provincial building society to form the National and Provincial building society at the start of 1984.
Indeed, many people were opposed to that merger—for two reasons. The town became known throughout the nation from the advertising of that society. The building society, along with Burnley football club, promoted Burnley throughout Britain.

Mr. John Mark Taylor: Would the hon. Gentleman's constituents have objected to that amalgamation if the new building society had been called the Burnley?

Mr. Pike: I am sure that the people of Burnley would have been much happier if it had been named the Burnley and Provincial, the Provincial and Burnley, or some such name. The people of Burnley were opposed to the merger and may well have been tempted to vote against it for that reason, but people in other parts of the country would not have done so because they viewed that change in the same way as people will view this Bill. In other words, they were most concerned about the stability of the building society and the features that we all wish to protect, which we hope will be adequately safeguarded by this legislation.
The Burnley building society was known to the people of the town as the Burnley and they regarded it as their bank. Many people in northern towns do not have bank accounts. It is only relatively recently that people have begun to open accounts with the joint stock banks.
The position of the Burnley building society also highlights the problem of non-agreed mergers with which the Bill deals. If that merger had not been voted for by the members of both societies, it would have been wrong for it to be forced through. I have strong reservations about the proposal in the Bill that gives draconian powers to override the wishes of the people whether it be in relation to a relatively small building society or not.
My hon. Friend the Member for Ipswich (Mr. Weetch) made the point that East Anglia has a large number of local building societies which, like the Burnley, have a fine local tradition. The same applies in many other parts of the country. If people do not want a merger, there should be no way in which it can be forced through.
We need a Bill which will ensure the safety, security and stability of building societies. We must make sure that the Bill protects the interests of the members, whether they be borrowers or depositors. We must also protect the interests of the staff. There is sometimes a reluctance to remember that the staff's interests must be taken into account. We must be mindful, at a time of technological change, that staffing requirements in building societies are changing rapidly. We must be aware of their concern in that direction.
Given the changes that have taken place in building societies over recent years, it is surprising that, when one looks at adverts, whether in newspapers, on hoardings, on television or in the windows of the building society, one rarely sees share accounts being promoted as share accounts. One sees "liquid gold" accounts, accounts combined with a credit card and higher interest accounts. The different building societies have a wide variety of names to choose from. I am a little worried as to why the share account appears to have been demoted. Certainly it has been played down.
I hope that, as has already been mentioned, when the Bill is passed arrangements will be made for a building society ombudsman. There could well be a need for such a person. The insurance industry has had one for a number of years. Banking is to have one and that has been relatively recently announced. I hope that that will be considered as the Bill progresses. If such an ombudsman were recognised by all the building societies and had real authority in resolving disputes, it would take a lot of work away from the commission and enable the commission to concentrate on its most important task—the supervision of societies. That is important.
I am worried about the views expressed by the Abbey National building society. I have strong reservations about the prospect of a building society changing to a public limited company. It will completely change the concept. Just as I spoke against the Trustee Savings Bank Bill, so I have the same opposition to this principle. Building societies have grown on a mutual basis for many years, and that should not be changed. However, if that provision goes through, it will mean that building societies can be taken over by any bank. I am aware that Citibank of America has said that it is looking for 350 outlets in Britain and a public limited company building society could well provide the outlet that it wants.
The voting requirements need to be strong. My objection to the Abbey National's proposal, and the reason why I would if anything want to go even further than the Bill proposes, is that it wants a simple two-thirds majority. Certainly I support the proposal in the Bill rather than that of the Abbey National, which I could not accept. We need the type of safeguard which would give not only investors but also borrowers a vote. I would welcome that, because they have a right to be involved.
On the question of the freedom to manage and the requirement of deposits for people who stand, I accept the figure of £100 in the Bill. I would not want to see it go up to £250, the sum that the Abbey National is talking about. We must have democracy there. My hon. Friend the Member for Ipswich referred to the self-perpetuating system in the past. We do not want to move in that direction.
The staff have strong reservations about the Bill. I met the Federation of Building Society Staff Associations which represents the majority of building society staff. I believe that the Halifax and the Leeds Permanent building societies are not in it, but most of the other big building societies are. It recognises the need for change. Its members wished to make the point that they are not Luddites and they accept that the Bill should go through.
One aspect that the federation would particularly like to see included in the Bill relates to matters affecting staffing and the future of societies. It believes that some consideration should be given to include compulsory consultation, without the power of veto for the staff of building societies. I always support the view that the staff of any organisation should be consulted. I shall be consistent and say that that is a fair point, and I hope that it will be taken into account in Committee. If there is any way of providing such a safeguard, I would welcome it.
I generally support the Bill and will seek to ensure that the safeguards that are in it remain and, if anything, are strengthened. I hope that the one or two points on which I have reservations will be dealt with satisfactorily.

Mr. John Mark Taylor: Any debate which calls into question the immortality of the Lord Chancellor is bound to be a nourishing and interesting one. When it also quotes from none other than Clive Thornton, it is clearly a wide and catholic debate, too.
My remarks will not be uncharitable to the building societies. This is no time for being uncharitable, least of all to an organisation which has made a great virtue of borrowing short and lending long. Indeed, it has made a great success of an admittedly privileged and dominant position in a particularly historic market. After all, building societies lend in fairly safe circumstances—with belt, braces and form-fitting trousers, one might almost say. Usually they lend with the security of 105 per cent. or more of the amount of money that they lend, and with the benefit of a mortgage protection policy for which the borrower has to pay, secured by a valuation for which the borrower also has to pay. When we recall that building societies have enjoyed, by statute, certain historical privileges regarding taxation and stamp duty, it is not difficult to see how they have reached their dominant position in the home loans market.
Building societies have been able to benefit greatly from high interest rates. With the dominant position of the societies, usually the home buyer reconciles himself to a society's terms. There is not much variation between one society and another. It is no more than Hobson's choice for the borrower who buys his home. He is consoled, as has been said, by tax reliefs which make him less discriminatory, in looking at the interest rate that he has to endure, than the customer on the other side of the building society's activities, the depositor, who discriminates very keenly as to the institution with which he places his money. It is because building socities have been able to lend money expensively that they are correspondingly able to attract deposits by high interest rates.
Therefore, without being unfair, one can say that the societies have thrived on a high interest rate regime. In the process they have taken a considerable amount of money out of the economy. Of course, they have helped people to become home owners. One would not doubt the virtue of that for a moment. It would not be stretching anyone's credulity too much to say that if any hon. Member had the good fortune to acquire a few thousand pounds that he had not expected—perhaps through the death of an elderly aunt in Australia—and had the choice of investing that money in an engineering company in the midlands or putting it in the Halifax building society, it would not take him long to decide.
There is an absence of symmetry in the workings of building societies. They can offer very good terms to depositors while at the same time lending money quite expensively to borrowers. That absence of symmetry is also shown when interest rates rise. When that occurs, the person who has borrowed money on a mortgage finds that his interest rate rises immediately and automatically, whereas the person who has deposited funds with the society often finds that, to participate in the new higher rate, he has to give notice, close his account and open a new one.
The role of the building societies—certainly in the 1970s, when house prices climbed so dramatically—is


one more reason from the recent past why most fair-minded people will welcome the Bill, and welcome reform within the building society movement. In the 1970s, as many of us remember rather painfully, building societies were still operating on a basis which was such that at one stage in the year they were starved of cash, while at another time they would be bursting with funds and lending uncritically on an inflating property market which they were actually helping to inflate. It is like a shallow tray with liquid in it: if it is tilted a little one way, all the liquid goes to the other end. The system governing building society rates was not them a very discriminating instrument. I think it has improved in recent times.
There are now so many building society branches that some of the high streets in our constituencies are heavily peopled with them. It is a mortmain on the freehold on each of those individual sites. In many constituencies, the high street is decreasingly owned by local people and increasingly owned by institutions from outside the town, with no prospect of those sites ever going back into local private ownership.
The building societies have indeed come a long way from their collectivist origins. Many changes have taken place during that long journey, and we are due for a review. The Bill is a substantial one and a serious attempt to carry out a comprehensive review. I welcome it.

Mr. William Cash: This is, in a sense, a rather nostalgic occasion for me. My family have had much to do with the building society movement in the past century. The Abbey National building society was founded by my great-grandfather, William Cash, and his cousin, John Bright. But we now have to move into the 20th century.
I welcome the Bill. It provides an opportunity, in an intelligent and good framework, to ensure that the young people of tomorrow—and, I hope, those of the immediate future—will be able to get access to funds, which they have had some difficulty in doing. It is of the greatest importance that young people should be able to acquire homes for themselves. The Bill should go a long way towards helping them so to do.
My first point concerns competition. I raised it when the Administration of Justice Bill was going through the House last year. We could be moving into a situation in which we have effectively four main clearing banks which control a series of services, many of which are set out in the Bill. Incidentally, the Bill has to be read closely with the Financial Services Bill, which was released today and forms a kind of kaleidoscope of legislation in this field.
There is no definition of investment in the Bill. That is extraordinary, as there is an extensive definition of investment in the Financial Services Bill. I should be grateful if the Minister would consider that point.
I am slightly concerned about clause 32(2), which enables the Treasury, by order, to vary the power to provide services
by adding to or deleting from it any description of service or any provision or by varying any description of service".
Will the Minister consider whether that is going too far? Will he let us know in due course exactly what is intended by it? As it is related to financial services, it would seem that the Treasury would have the power to extend to almost

anything the services that a building society could provide. I shall be grateful for some indication of the direction in which the Minister thinks that the power is likely to be used.
Clause 86 relates to the transfer of business to a commercial company. The 20 per cent. restriction—given that there is the power to do the conversion—should be much more easily obtained than by the 20 per cent. rule that is being imposed. Given that building societies are to be enabled to do it, I have some reservations as to whether the cost is justified in the circumstances.
The press note that was published on 6 December says that comments to the Treasury are invited by the end of January. I understand, therefore, that that is part of the consultative process of Second Reading. I ask the Minister if he will look at the matter. I understand the reasons for including the 20 per cent. rule, but I feel that if it is to be done it will be done at great expense by a few of the building societies and I wonder if it is as important as has been claimed.
I wish to refer again to the subject of competition. When I was studying the material for the Administration of Justice Bill 1985 I came across a speech by Sir Gordon Borrie about the provision of competition in conveyancing. He said that it was important to have an element of weed killer that he would liberally supply, if given the opportunity, to make sure that there was competition in the provision of conveyancing services as and when provided by the main institutions. As we move into this new era of competition between the banks and the building societies, I ask the Minister to make sure that we do not end up with the banks having such a stranglehold over the system that the consumer at large finds that without that dose of weed killer he is faced with cartels which have a tremendous amount of monopoly power in terms of land tenure, stock jobbing, insurance, brokerage, estate agency and conveyancing services. I am concerned that there might appear to be competition but, although justified in international terms, from the consumer's point of view there is a near monopoly.
Perhaps the Minister will have an opportunity to explain those matters in Committee. I welcome the Bill and I look forward to hearing the Minister's comments.

Mr. Peter Viggers: Like many right hon. and hon. Members this evening, I must declare an interest in this matter, although it is a negative interest. If it were a theatrical performance, the programme note would carry an item that read "Mr. Viggers appears by courtesy of the Portsmouth building society."
I join other right hon. and hon. Members in praising my hon. Friend the Economic Secretary to the Treasury for introducing the Bill and for all the work that I know he has put in in the many months since its gestation began. He has taken great care in consulting many people, building societies and others, and it is a great tribute to him that most of the debate has been criticism of points of detail. Broadly speaking, the Bill has the support of both sides of the House.
I support the modernisation and liberalisation of the building society movement, but I am concerned about three clauses. Clause 84(2) gives a building society access to the list of members of a building society which it may wish to acquire or merge with. I am concerned for several


reasons that another building society should have access to a target building society's list of members. The list has considerable commercial value. Larger societies might try to pick off smaller societies for various reasons. The new commission will have the power to regulate the reserves of societies and it may be that a society which has insufficient reserves will find it an attractive proposition to approach another society that has more adequate reserves in an attempt to merge.
Some hon. Members have referred to rationalisation in building societies. It has been pointed out that the number of building societies has reduced from 400 to 190 in 10 years and it is likely to reduce further. I quote from Mr. Peter Birch, the chief general manager of the Abbey National building society, who was interviewed on television on 8 December 1985:
there are far too many Building Societies—in some High Streets there are 25 Building Society Branch Offices. The number of societies must reduce dramatically in the near future".
There will clearly be a desire on behalf of some managers of building societies to merge with others and I think that the reduction in numbers in the past 10 years has shown that building societies are receptive to mergers. I do not think that it would be a good idea to open the door to contested mergers.
Unfortunately, I have some experience of a contested takeover, not among building societies. I am the director of a small oil company. By oil company standards "small" means about £70 million market capitalisation. We were subject to an aggressive takeover about a year ago. It took about £500,000 of legal fees, accountancy fees and circulars to beat off that unwelcome takeover bid. That did not include the cost of any advertising. We must think of the problems that would occur if one building society were to approach another and seek to merge with it against the wishes of the target building society. The money deposited by investors in the building society would be used in a contested bid. That is not what the money is there for.
My hon. Friend has taken great care to build restrictions into the Bill which will prevent building societies from being taken over. I respect the fact that he has included a provision so that the members of the target company have to pass a resolution in terms of borrowers and depositors. There are restrictions on the minimum number of people who can vote in the meetings of the building society to approve a merger and so on. My argument is that we do not want to be involved in that area at all.

Mr. John Fraser: I wonder whether the hon. Gentleman will explain something that has always mystified me. Why do smaller building societies—I think the Portsmouth building society is one of them—tend to place their mortgages through brokers who take commission from borrowers and tend not to use panel solicitor arrangements? That increases the cost to borrowers. Why is that more prevalent in smaller building societies than large ones? Is that one of the things that they are sensitive about in relation to takeovers?

Mr. Viggers: The hon. Gentleman is an experienced Member of the House and, I think, a practising solicitor. I think that he is probably in a better position to answer that than I am. I cannot speak on behalf of the smaller building societies with whom I have no connection other than that which I have disclosed. The smaller building societies with whom I have had discussions and who have informed me of their position appear to be extremely

successful in their rate of growth and in the service that they provide to their customers and depositors. Other than that, I cannot answer the hon. Gentleman's question.
My second concern is clause 82. It is a question born of interest rather than a concern of substance. Borrowers are to be given voting rights for the first time in the Bill. It is interesting that that should be the case. I cannot see that a borrower from a building society should have any more right to vote over the future of the building society than a person who has an overdraft from a bank. One may think that a borrower from a building society is in a more stable position than a person who has an overdraft at a bank. However, the average mortgage lasts approximately seven years, whereas a bank customer is usually there for life. It is a staggering fact that a young person is more likely to get a divorce than to change his clearing bank. Therefore, there is more stability in overdrafts than in borrowing from a building society.

Mr. Christopher Hawkins: That figure about the average mortgage lasting seven or five years is an illusion because that is how often, on average, people move. They then take out another mortgage or transfer the mortgage to another house. The building societies continue to quote that figure and it is terribly misleading.

Mr. Viggers: I accept my hon. Friend's point. I do not have any figures, and I do not know whether any hon. Member has, as to the number of people who return to the building society which they were previously with. I suspect, as my hon. Friend said, that they frequently return to the same building society. I accept his point.
My third point relates to my anxiety about clauses 11, 12 and 18, which refer to the restriction of the building society's right to lend on premises which are defined as
for a person's residential use".
The inter-relationship between those clauses means that a mortgage can be granted on freehold and leasehold estate, provided that it is not more than £60,000 to any one borrower or limited company. The restriction is intended to apply so that not more than 10 per cent. of the amount lent by a building society will be for premises other than those which are for the residential use of the borrower. To find the definition of
residential use of the borrower
we have to go to other clauses.
The question then arises whether premises are exclusively owner-occupied. In areas such as that which I represent there are many guest houses, rest homes, hotels, flatlets, bed-sits, and shops to which loans are made. It may be that 40 per cent. of those premises are not occupied exclusively by the owner. Large parts of those premises are in common use. I am worried that building societies might be unduly restricted if they have to make 90 per cent. of their loans on premises which are occupied exclusively by the owner. Will my hon. Friend consider that point, which has been made in writing? I hope that he will take it into account in Committee.

Mr. Conal Gregory: This is the first entirely new legal framework for the building societies movement since the Building Societies Act 1874, and it is right that it should be debated at some length today. Much has changed since then, with societies wishing to extend their range of services. In considering the Bill, the House is modernising and strengthening the operations of societies,


including the establishment of a Building Societies Commission and a new statutory investor protection scheme.
I fully support extending investor choice, commensurate with adequate safeguards. The conversion procedure should allow those societies which wish to develop beyond the present legislation to evolve to the benefit of their members. However, we should not lose sight of the raison d'etre of the building societies, which is to facilitate the purchase of homes. Everything else is ancillary. Widening the package of services to include estate agency, valuations and survey work may be helpful, but it may be a grey area where there is a conflict of professional loyalty between service to the society and those seeking funds.
The management of residential land and the operation of services in other European Community states can be seen as useful adjuncts to the societies' overall role.
Building societies have greatly assisted individuals and families to become home owners. They serve about 25 million people. It is right, therefore, that the Bill restricts 90 per cent. of lending to owner-occupiers with first mortgages. After all the Conservative party encourages saving and investment, fosters home ownership—now about 62 per cent. of the population—and promotes improvements in housing standards.
I believe the members of the Building Societies Association to be honourable, and I am proud that Yorkshire is the home of no fewer than 11 such societies—seven giants in the form of the Bradford and Bingley, Halifax, Leeds and Holbeck, Leeds Permanent, National and Provincial, Skipton and Yorkshire; and four fine, if smaller, societies: Barnsley, Beverley, Scarborough and Sheffield. All 11 of those Yorkshire-based societies give greater protection to investors than other non-association building societies by Government designation as eligible for trustee investment status, and by being members of the Building Societies Association's investors' protection scheme.
However, there are 32 building societies nationally which do not belong to the association. I seek assurances from my hon. Friend that investors will be adequately safeguarded. Some of the societies have sizeable liabilities—the Century with over £6·1 million, the Foresters with over £1·7 million, Kidderminster Equity whose liabilities exceed £2·7 million, Louth, Mablethorpe and Sutton with over £3·3 million, Merseyside with over £2·7 million and Thrift with over £9 million. Three societies in the group are based in Yorkshire—the Capital and Counties of Sheffield, Kirklees of Dewsbury, and the Ecology of Keighley which has some admirable aims in revitalising older property. The liabilities of all those non-association members exceed £60 million. Those societies include some with enticing names such as the British building society, the County of London building society, and the United Kingdom building society, and, one might add, the Immigrants building society which might well appeal to ethnic minorities.
Investor protection under the Bill must be more beneficial than that of the association which is less than 100 per cent. The Bill suggests a level of protection of only 75 per cent. That is much less than should be acceptable

to those who entrust their savings to the building society movement. Why should less than 100 per cent. be set in statute?
On the plus side for investor protection, I welcome the hope that societies that are currently outside the scheme will come within the range of the Building Societies Commission and safeguard funds deposited with them.
Whilst I have drawn my hon. Friend's attention to the need to protect the investor through the full range of institutions that seek the status of a building society, the greatest omission from the Bill is in respect of protection for the borrower. I give three telling instances. The first is the differential rates of interest, the second is portability, and the third is penalty clauses.
On differential rates of interest, the societies are quick to respond to market forces for investors but slow for borrowers. There is such a wide turn that societies could assist by reducing their management charges which are about £1·19 for each £100 of assets managed.
With regard to portability, societies should not make it difficult for borrowers to transfer their mortgages. Portability is an important factor in job mobility. Penalty clauses should be outlawed. For example, societies should not seek to impose three months' penalty interest if a mortgage is redeemed within three years of its commencement.
Whilst the authorisation regulations ensure that building societies have to maintain a minimum liquidity ratio for trustees' funds, clause 19 does not continue that requirement, but it sets an upper ceiling. There is no minimum reserve ratio as presently set out.
It will surprise many inside and outside the House that societies have allowed their liquid assets to rise to about one-fifth of total assets—20 per cent. plus. That is excessive. It goes beyond a reasonable buffer level of, say, 8 per cent., but the Bill permits an increase to 33·5 per cent. If the primary role of building societies is to assist home owners, their funds should be invested substantially in bricks and mortar.
I echo the warmth expressed already for the friendly and helpful attitude of building societies' staff. I know that those in York are held in high regard and enable many citizens of all ages to have a solid stake in a property-owning democracy. More competition and freer financial services will benefit all who seek to own a roof over their head and build up a small nest egg for the future. The Bill takes us further towards those objectives. I commend it to the House.

Mr. Tim Smith: I welcome the Bill, as far as it goes. I congratulate my hon. Friend the Economic Secretary on the work that he has put into producing it over the last two years.
The Bill is really the product of an agreement between the Treasury and the Building Societies Association. As a result, I find it unduly cautious and unduly conservative. Of course, no one should underestimate the major contribution that building societies have made to home ownership, but I am always a little suspicious when people get up, one after the other, and tell us just how wonderful something is, and when they are generally euphorically ecstatic about it.
The myth that building societies are the only institutions that could contribute to home ownership was destroyed quickly when the clearing banks moved into that


market four or five years ago. As I said in an intervention, they are now very big in that market and service a large number of people. Therefore, it is not only the building societies that are making a major contribution.
Today, the financial services market is changing rapidly, and building societies are well placed to take advantage of the growth and the proliferation of financial services. That growth has, in part, been stimulated by the Government's policy initiatives on the extension of share ownership and on personal pensions, all of which is to be welcomed. The building societies are well placed because of their branch network and their prime positions in many high streets.
If we allow building societies to compete, they will do so on an equal basis with the clearing banks. For too long, the clearing bank cartel has been left untouched. At the top end of the market there is fierce competition for business. The Americans are falling over themselves to lend to the likes of ICI. But at the bottom end of the market there are four stodgy old clearing banks with little to choose between them. It is the small business man who is the loser. Of course, he is partly to blame because, when he asks to borrow money, he is so frightened of being turned down by his bank manager that the last thing that he asks about is the rate of interest.
What bank ever rang a small business man and offered to lend him money? What clearing bank employs people as salesmen? For too long the clearing banks have had it too cosy. As a .result, the cost of borrowing is far higher for the small business man than it need be.
There are only two solutions to the problem—first, the clearing banks should be broken up, or, secondly, they should be subjected to more rigorous competition. I cannot envisage any Government agreeing to breaking up the clearing banks. Indeed the Labour party wants to nationalise them, so competition would be completely eliminated. The solution must be more competition. However, effective competition can be provided only by institutions that already have a branch network. In practice, it must be the building societies.
The Bill is too restricted to allow that to happen. That is because of the deal to which I referred between the Building Societies Association and the Treasury. The association is unduly cautious because most building society general managers have never worked anywhere other than in a building society and are frightened of radical change.
One man who does not fit that category is Mr. Peter Birch, the chief executive of the Abbey National building society. On the competition point, he says that societies have to compete with their hands tied behind their backs. The Abbey's total assets are about £20 billion. The 5 per cent. restriction means that it will be limited to lending no more than £1 billion unsecured, rising to £2 billion. That sounds a great deal of money, but we need only look at the clearing banks' figures to put it into perspective. Mr. Birch believes, and I agree, that the 5 per cent. and 10 per cent. figures should be doubled.
Then there is the question of incorporation. My view is that the Bill should require all societies to incorporate and become subject to banking supervision within 10 years of the passing of the Bill—that is by the end of 1996. We could then do away with the two separate bodies of law and the two separate regulatory structures designed to regulate two groups of institutions that should, in due course, be competing as equals.
Mr. Birch does not go as far as I would. He simply states, and I agree, that the proposals for voluntary conversion are so restrictive as to be unachievable. In particular, the proposal that 20 per cent. of depositors should vote for incorporation is wholly unrealistic. The Halifax would need 1·5 million votes in favour and the Abbey National would need 1·6 million votes.
We must remember that votes are not weighted as they are in companies. If I have £1 invested in a building society, I have one vote. If I have £20,000 invested, I still have only one vote. It is an absurd voting structure.

Mr. Christopher Hawkins: Why?

Mr. Smith: That is self-evident. Building societies have millions of investors and they must treat them all as equals. They must send out millions of copies of the annual report and accounts. Most people do not put their money into a building society because they want a copy of the report and accounts, because they want to make the building society accountable, or because they want to participate in the reserves. They do so because they want security for their money.
The voting structure is nonsense. We could overcome the problem of incorporation if we recognised that large depositors should have more say than someone who invests 50p. The system is a nonsense. Only a tiny majority of depositors actually take any interest in the affairs of the society in which they invest. They do not invest to become members of the society; hey are probably not aware that they are entitled to shares in the reserves. They invest for security, accessibility and convenience.
I once went into a building society and asked for a copy of its annual report. The counter clerk had no idea of what I was talking about. The return had to be obtained from head office. That is how often investors ask about a society's affairs and that is how much interest they take in the society. Therefore, why are we intending to make it so difficult for societies to incorporate?
In a relatively protected business environment, building societies have been a great success. They have marketed their limited but expanding range of services effectively. Their high street branches are much more attractive and inviting than those of the clearing banks. This Bill offers a great opportunity to allow them to take on the monolithic clearing banks. If they are to succeed, as Mr. Birch said, they must not have their arms tied behind their backs.

Mr. John Fraser: Like other hon. Members, I must declare an interest as a borrower and a lender, and, of course, as a solicitor. It is only right that I should declare the latter. My hon. Friend the Member for Great Grimsby (Mr. Mitchell) is not here, but some matters involving solicitors evoke great passions. It is almost as though Mr. Eddie Shah had undertaken to do his own journalism, and also to sub-contract for others as well.
I can quite understand why these matters will be debated with great passion. There needs to be an occasion on which that single issue can be discussed by the House. There needs to be an opportunity to vote on that issue alone. The issue has been raised not only by my hon. Friend the Member for Great Grimsby, but by other hon. Members.
I have to make a second declaration, which is not one of interest but one of affection and love. Like many other hon. Members, I am a fan of the building societies, and even more so of the principle of mutuality and of the non-profit making structure that building societies represent.
Of course, building societies are not without their blemishes, although it is very difficult to find many serious blemishes on their record during the past couple of hundred years. Even when blemishes have arisen, the movement has rallied round. For example, it did so when the South London building society was at risk; the Woolwich building society assumed its obligations and came to the rescue. In broad terms, the building societies have fulfilled the functions that they set out to fulfil when they were formed 200 years ago. They provide finance for housing at reasonably cheap rates.
It is worth while reflecting for a moment upon the success of building societies. On the whole, they have been efficient organisations. I have found them personal and free from the mystique and fear that the banks impart to people wanting to borrow money. They do not engage in the excessive pontificating and remuneration associated with the top bankers. The building societies' operating margins have been extremely keen compared with other private sector lenders and Government organisations. Above all, the building societies have been patriotic. I agree with the Economic Secretary to the Treasury that building societies exist to provide housing in the United Kingdom. Broadly speaking, they should continue to fulfil that function.
I have recently been in correspondence with a bank, although I do not know why it circularised me. I opened a letter one day in which one of our leading banks told me that I should now invest in Germany and in German growth. I dropped it a note about patriotism, which I assume it dismissed. The following month I received another note from the bank telling me to invest—

Mr. Penhaligon: In Japan.

Mr. Fraser: The hon. Gentleman is correct; he must know which bank I am talking about. The same bank is fairly heavily committed in Argentina and I do not suppose that there are many countries in which it would not put its money if it thought that it was possible to turn a penny for its shareholders.
I do not wish to spend time castigating the banks, but there is a strong distinction between banks and building societies. The banks, because they think it is in the interests of their investors and their shareholders, are ready to push their money into any part of the world, without morals or remorse. The banks believe that it is their function to make the maximum profit by any form of operation and the bank rate tribunal some years ago revealed the full depth of these operations.
In contrast, the building societies are patriotic bodies—partly because the law does not allow them to be anything else. I hope that the building societies continue to provide the £100 billion for investment that is largely sunk in Britain. If there is a choice between providing money for people who are badly in need of housing, whether in Brixton, in the constituency of my hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) or in any other area, providing money for jobs or lending money to buy second homes on the Costa del Sol, I would want

the money to be invested in Britain, in our future and our jobs. No aspect of building societies legislation should weaken the building societies' long-standing tradition of investing in this country.
Building societies are proof that the profit motive is not the only motivating force. They have shown that social ownership in a competitive environment can be a roaring success. That has been such a success that the building societies have written their own White Paper—the Government did not write it—for reform. That is why the Bill is before the House today. The last thing I want to see is the building societies turning into a capitalist institution modelled on the banks. I admire, and the Opposition want to preserve, the principle of mutuality, based usually on one person, one vote. We would like to add to that principle the principle of accountability.
If there is to be any change, there should be legislation to make the banks into mutual organisations rather than to turn the building societies into public limited companies. I welcome the Economic Secretary's comments about the greater accountability of building societies to their members.
The Opposition are wholly opposed to the proposal that building societies should be able to convert themselves into public limited companies. The Treasury proposals are very much constrained. Massive constraints are built into the idea that a building society can convert into a public limited company. I realise that the clause relating to that is a dummy clause. I hope that the Government, like a baby growing up, will throw the dummy away and remove the proposal to convert to public limited companies. I have some reservations about the practices of some of the smaller building societies, but it would very much divert the energy of the building society movement if it were to start becoming involved in contested takeovers. There is a good case for dropping those provisions.
It is suggested in the building societies' document of February 1984 that the movement should be able to lend overseas, especially to EEC countries. I think that it would be a pity if that were to happen. It would be a drain on investment. There is enough money pouring out of Britain already to invest in industry elsewhere without the building societies joining the queue.
As I understand it, it is proposed that the building societies should be enabled to invest comparatively small sums in subsidiaries, which will then raise funds for lending on the purchase of property outside the United Kingdom. If that is done by a subsidiary which raises its funds locally—there can, of course, be a link with the United Kingdom society—that is all right. If it means a flood of funds leaving the United Kingdom, I am opposed to it.
I do not believe that it is necessary for building societies to place their mortgages via brokers. It should not be necessary for a borrower to have to pay a broker. He will have to pay the broker for finding a mortgage with one of the smaller building societies and, in effect, he will pass on a substantial commission to the broker on the arrangement of life assurance. A society's lending policy should be open and known and not a vehicle for others to make a profit out of the house purchase transaction, which is not necessary.
We need a strong consumer voice in the running of building societies. In the past, this has asserted itself through the National Consumer Council. There have been changes in policy, so that borrowers now have a choice of


insurer for their fire insurance. A good deal of pressure has widened the system of panel solicitors, which has reduced the cost to the borrower.
I want to see a strong consumer voice on the Building Societies Commission. I understand that it is intended that there should be between four and 10 members. When the Minister replies, I hope that he will tell us how many of the members will be consumer representatives.
There is no need to he afraid of an open discussion between the Building Societies Commission and the building society movement about the development of building society policy. For instance, the commission and the movement should not be afraid to ask building societies about their redlining policy. I know that that policy has diminished considerably and that societies such as the Abbey National have done a great deal to help in the purchase and renovation of properties in the inner cities. However, I hope that the consumer members of the Building Societies Commission will press for openness of building society policy on lending in the inner cities, which were called redline areas. I hope also that they will encourage building societies to develop policies that bear on the categories of borrower, so that there is a fair spread of lending covering those at each end of the income range. I trust that the spread will include lending to those from different ethnic origins and to women as well as to men. Much more information should be provided to members as well as consumers.
I hope that building societies can be encouraged to take a public view on their proposals for unsecured lending. I understand the societies' argument that, if they are to run current accounts and guarantee cheque systems, there is always the risk that someone may run into overdraft and need to have unsecured lending provision. On the other hand, for building societies to lend as much as £20 billion unsecured, for purposes unassociated with housing, would be a great departure from the traditional role of building societies, and one that I would regret.
I should like to see the societies using their powers for unsecured lending—which is limited to 5 per cent. of their lending—for top-ups on repairs, for example, when someone is short of money, cannot afford to repair his home without borrowing and does not want to go through all the formalities associated with a further advance. Unsecured lending could well be used for other forms of housing expenditure instead of using that provision for entering into competition with the banks.
The hon. Member for Beaconsfield (Mr. Smith) wants to see the building societies with the shackles taken off as the big competitors of the banks. That is a perfectly honourable aim. If I had to choose between the building societies having the shackles taken off to provide more money for housing and the building societies having them taken off to provide more competition with the banks, I know where the Opposition's priority would lie—in the provision of housing.
We believe that legislation should codify the best voluntary standards to protect investors. It is wrong to have a doctrine of equality of misery with the banks. The guarantee to investors should be at least 90 per cent., and preferably 100 per cent., which would make the large building societies more careful about the activities of those who might be at risk.
At the moment, building society lending is almost exclusively for owner-occupation. We should not be too starry-eyed about this, because the Bank of England

calculated in one bulletin that about half the money that was being lent for the purchase of homes was leaking into other forms of financing, such as for use in borrowers' businesses, in trading up to get the advantages of capital gains and in purchasing consumer goods. One must not make too light of this. There has been a series of commentaries on this matter, including "Faith in the Cities" and the reports of the Duke of Edinburgh, and even commentaries from building society organisations. There is concern about the use of subsidised money which is not going primarily in the provision of housing but is being fed through the system of house mortgages for other purposes.
There is an overwhelming demand for private housing to buy, which is being satisfied by the building societies movement, but the overwhelming need, as opposed to the overwhelming demand, is for low-cost housing to rent, or to buy, or for mixed tenure. I should like the building societies to put more money into meeting the overwhelming need for housing as well as the demand for funds simply for house purchase. In some ways, the 13ill does not go far enough in giving the building societies movement flexibility to lend for different kinds of tenure.
I am not certain that it is right to restrict building societies to 90 per cent. lending for class 1 assets when they could be lending or investing more money in, for example, shared ownership schemes. They could put their money into many other types of schemes—for example, for the purchase of property for the elderly. Many elderly people want to get out of their large houses, to realise their capital and move to a combination of renting and purchase so that they can release some of their capital for their old age. I should like building societies to encourage such an operation. I want them to put money into shared ownership schemes and towards housing to rent. Within the primary purpose of providing money for housing, I think that building societies may be too restricted in the percentages laid down for lending for house purchase.
Improvements and repair are another aspect where we could do with some experimentation in the way in which building societies help housing. The repair and improvement policy is in an absolute shambles. Because of the way in which housing investment programmes have been cut, many local authorities, whether Labour or Tory—there is no longer any political distinction between Labour and Tory authorities—have had to cut their house improvement and repair programmes arbitrarily. That is to the great distress of many individual house owners and, in the long term, is to the disadvantage of our housing stock.
It might be a good idea if the Government were to look at ways in which the building societies—I am not excluding the local authorities in any way—might help a great deal more in housing repair and improvement rescue operations. Some subsidy might be channelled through building societies. They are well equipped to react quickly to borrowers' needs. We have these new powers to provide for unsecured lending. I am sure that is worth exploring at a time when there is a virtual famine of money available to the poorer owner-occupier for housing and repair. Many of the Bill's provisions will help the building societies to compete with the banks for housing funds on fairer terms. As a result of the Bill, I hope that even more money will flow into the provision of housing, which is still one of the country's greatest needs.
In so far as the Bill fulfils those purposes, we welcome it. In so far as the Bill contains aspects which may weaken


the general thrust of the building society movement, we should examine them carefully in Committee. With those reservations, we support the Second Reading of the Bill.

The Parliamentary Under-Secretary of State for the Environment (Sir George Young): The debate has been a little like a mortgage—it has lasted somewhat longer than was envisaged at the outset—but it has been a good one, and bodes well for consideration of the Bill in Committee. My hon. Friend the Economic Secretary and I have made notes of the detailed points raised in the debate.
Hon. Members have shown considerable allegiance to small local building societies and have spoken of them in affectionate terms normally reserved for their football teams. I shall say a word about smaller societies later.
The Opposition motion says
That this House declines to give a Second Reading to a Bill
There seems to me to be a slight discrepancy between that and what the hon. Member for Norwood (Mr. Fraser) said in his closing remarks—indeed, what every Opposition Member said, apart from the hon. Member for Thurrock (Dr. McDonald). I think I can say without distorting the facts that, almost without exception, Opposition Members welcomed the broad thrust of the Bill and the general principles behind it, although, of course, with reservations about one or two aspects that will be examined in Committee.
I thought that the speech of the hon. Member for Thurrock was a rather conservative one. The reality is that the building societies now operate in a changing world. The legislative framework which may have been right 100 years ago is no longer appropriate. If we are to harness the energy and resources of the building societies in the ways explained by the hon. Member for Thurrock, we must look at the framework and modernise it. There was a general consensus, I think, that the Bill proposes a package of sensible measures that will enable those objectives to be achieved.
My hon. Friend the Member for High Peak (Mr. Hawkins) was anxious that the traditional role of the building societies should remain. As I believe he knows, at least 90 per cent. of their business will be devoted to their traditional function of mortgage loans for house purchase. I give him the assurance for which he asked on any necessary changes to the conversion procedure. I commend him on his successful campaign on index-linked mortgages. I think that he is right to juxtapose the measures in the Bill giving access to index-linked mortgages with the existing entitlements under the right to buy. It may well be that a number of local authority tenants, when they re-work the sums, will find that with an index-linked mortgage they are better off buying council houses with a discount than remaining tenants.
The right hon. Member for Halton (Mr. Oakes)—one of the many vice-presidents of the Building Societies Association who spoke in the debate—made what I thought was a realistic contribution. He outlined what was in it for the building societies. It is of course the case that the Building Societies Association has welcomed the Bill.
There was quite a lot of debate on unagreed mergers. An unagreed merger is one that is unagreed by the board, not by the members. If one is to follow the principle of

mutuality, which is control by the members, it is right that decisions about the future of a society should be taken by the members. As the law now stands, a building society board can effectively veto any merger proposal it happens not to like simply by refusing to circulate the proposal to members. This may be for reasons that are in the narrow interest of the board rather than in the broader interests of the society as a whole. I do not see why building society boards should be accorded this privilege.
That having been said, we recognise the fears expressed by hon. Members which reflect the concern of the smaller societies. Without some safeguards, it might be possible to abuse the procedures. The new merger procedures in the Bill embody a few safeguards. For example, no small society can merge with a much larger one without the consent of at least 20 per cent. of those eligible to vote. My hon. Friend the Member for Beaconsfield (Mr. Smith) said that that was rather a hurdle to overcome, particularly in the larger societies with a fluctuating membership, and limits will be placed on cash bonuses to members, so preventing one socieity from buying off the members of another with large payments from its own reserves. At the moment, there are no such restrictions, so that will be an additional safeguard.
My hon. Friend the Member for Ludlow (Mr. Cockeram) made a point about the costs of the annual report and drew an analogy with bank depositors, who are not entitled to receive an annual report. I am sure that he will recognise that the analogy is not fair, because a bank depositor is not a member in the sense that a depositor in a building society is.
The hon. Member for Truro (Mr. Penhaligon) suggested that the Government did not have much serious legislation to get through the House and had produced a 207 page Bill to keep Ministers, the House of Commons and civil servants happy. He said that he did not know why we were introducing the Bill. I suggest that he rereads in Hansard tomorrow the speech made by my hon. Friend the Economic Secretary. It sets out clearly what the problems are in the building society movement and how one needs an up-to-date framework to tackle some of the problems that remain in housing. I assure the hon. Gentleman that Ministers, Back Bench Members and everybody else have enough work to do without, just for the hell of it, engaging on a rather comprehensive exercise just to fill what he may see as a gap in the legislative programme.
My hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) made some points about early redemption penalties and the ombudsman, and we shall have a look at that. The hon. Member for Ipswich (Mr. Weetch) asked what perception the Government had of the future of the building society movement. In the moving peroration to his speech, my hon. Friend the Economic Secretary set out how we see the building society movement developing.
The hon. Member for Glasgow, Maryhill (Mr. Craigen) echoed an aspiration that we all have, that of cheaper mortgages. There is a tradeoff here between cheaper mortgages and the availability of mortgages. For the past few years, there has been no mortgage famine such as that which we used to have, although the price may have been the slightly higher mortgages. Speaking as a housing Minister, I would prefer to see the ready availability of mortgage funds, albeit at a slightly higher price, than the famines that we used to have at a slightly lower price. The hon. Member for Norwood asked about the exodus of


funds and recognised that my hon. Friend had dealt with this in his opening speech. It is our contention that money sent overseas should be raised overseas.
We are now in the consultation period of the Green Paper on improvement grants. We are absorbing the comments that were made on it, such as those made by the Building Societies Association, which has responded. Scottish conveyancing is under consideration. As the hon. Member for Norwood will know, the system in Scotland is different from ours and for that reason it is not appropriate to be dealt with in the same way.
My hon. Friend the Member for Slough (Mr. Watts) demolished the arguments put forward by the hon. Member for Great Grimsby (Mr. Mitchell). I am sorry that the latter was not here to listen to what my hon. Friend said about the real conflict of interest that can emerge when a building society solicitor also acts for the chap who wants the mortgage. He gave one example of a problem that might well crop up with the loan. The borrower might be better advised to go to another lender. It is not the case that the building society's solicitor would so advise him because he has a duty to his employer. The solicitor would have to divulge to his employer anything that might affect his willingness to make the loan, so the client might feel inhibited about seeking confidential advice about the change in his financial circumstances. There is a genuine issue about the conflict of interests over which the hon. Member for Great Grimsby slightly glossed.
The hon. Member for Burnley (Mr. Pike), like other Labour Members, welcomed the broad principle of the Bill and my hon. Friend the Member for Stafford (Mr. Cash) asked some difficult questions. He asked what services would be covered by the Bill and said that he could not find that information in the Bill. My hon. Friend the Economic Secretary, who knows the Bill backwards, advises me that schedule 8 will give the answer.
With regard to the investor protection scheme, we are increasing statutory protection, but it is open to the building societies and the BSA to continue the existing level of protection if they so wish. There is no detriment in what we are proposing. For the first time, investors with building societies will have the protection of a similar statutory scheme which depositors with banks enjoy. The BSA does maintain a scheme on a voluntary basis and it shall be free to continue that. The 100 per cent. protection is not the same protection as that which is given to bank depositors and one has to put them on the same basis.
The point was raised about the disclosure of a list of members in a disagreed merger. The Bill is clear on this. A list of members can be disclosed only for the purpose of circulating merger proposals and not for recruiting people to societies or any other purpose.
The hon. Member for Norwood seems to have a reputation with the banks as someone with a high disposable income ready to be invested in Japan, Germany or anywhere else. I must say that no one on this Bench receives letters from clearing banks inviting him to invest in this country or elsewhere. There is a slight inconsistency in what the hon. Gentleman said about being in favour of mutuality and yet against conversion. Conversion can take place only if the society members wish it.
Finally, I wish to comment on the housing aspect of the Bill which is my ministerial interest. The Bill gives building societies an opportunity to own and develop land as a commercial asset. This will enable them to offer a form of entry into home ownership which has been both

effective and popular—shared ownership or buying in stages. Until now, shared ownership has been achieved through housing associations or local authorities. Building societies have been involved in many of these projects as providers of finance. In future, they will be able to play a more direct role as the owners of the residual rented portion of the house. They will also be able to provide accommodation for rent which the hon. Member for Norwood was anxious they should do.
Index-linked mortgages provide scope for housing associations to obtain funds on terms which allow repayment to start low and increase over time by reference to an index. This matches their income from increased rent on shared ownership schemes. I hope that the good link between building societies and housing associations will be developed.
As Minister with responsibility for housing, I have taken special interest in such services, which play an important role in stimulating renovation work which otherwise might not be carried out. Two days ago I opened a new project in Gloucester which had been put together by the neighbourhood revitalisation services arm of the National House-Building Council and with the active co-operation of a local building society. Building societies have played an important part in these schemes, but there have been restrictions on what they are able to do. They have not been able to offer agency services. This Bill will enable them to do this. Anyone who has an interest in urban area housing will welcome these new powers.
We want to encourage the building societies to become much more closely involved in the revitalisation of our run-down council estates. Several societies are almost actively helping in this area by providing finance both for the redevelopment of estates and mortgages for the new owner-occupiers. In the Wirral, the local authority has teamed up with a builder and, with finance from a building society, tackled a council estate's rotten core. That area has been transformed and there has been a dramatic spin-off effect on the rest of the estate.
We want to see much more similar work with the building societies taking a prominent, active role on run-down estates. The Bill gives building societies the flexibility they need to do so. The building society movement has a unique status in this country, both legally and in the public mind. They are rooted in their mutual tradition and they take their social responsibilities seriously. But they have a responsibility to act prudently, and we do not want building societies to act as social agencies at a loss. But our proposals sit well with their traditional activities. They have been associated with housing associations and housing trusts and will be able to do much more by setting up subsidiaries as housing trusts, which they cannot do at present. We want to do more to simplify house buying. Again, the Bill makes a contribution to that, because the societies will be able to offer estate agent, surveying and valuation services, which will benefit house buyers and sellers.
The Bill will bring many benefits to housing. Home ownership will be made easier for many. New efforts can be put into solving the many problems of our inner cities, and we can do all of that without altering the traditional image of the building societies. We are building on an enviable reputation—substantial achievements for many years—and I believe that the founders of the societies would be pleased with the new opportunities that we are offering.

Amendment negatived.

Main Question put forthwith pursuant to Standing Order No. 41 (Amendment on Second or Third Reading), and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 42 (Committal of Bills).

Orders of the Day — BUILDING SOCIETIES BILL [MONEY]

Queen's recommendation having been signified—
Resolved,
That, for the purpose of any Act resulting from the Building Societies Bill, it is expedient to authorise the payment out of money provided by Parliament of—

(1) any expenses incurred by the Building Societies Commission established by that Act which are attributable to that Act; and
(2) any expenses incurred by the Chief Registrar of Friendly Societies which are attributable to any functions of his or any of the registrars of friendly societies under the Act.—[Mr. Maude.]

WAYS AND MEANS

BUILDING SOCIETIES BILL

Resolved,

That, for the purpose of any Act resulting from the Building Societies Bill, it is expendient to authorize—

(1) the levying of annual charges on authorised building societies towards the expenses of the Building Societies Commission established by that Act;
(2) the imposition of charges to corporation tax by provisions relating to the treatment for the purpose of the Tax Acts of payments made to building societies by the Building Societies Investor Protection Board established by that Act;
(3) The payment into the Consolidated Fund of any sums falling to be paid into that Fund in pursuance of that Act.—[Mr. Maude.]

Legal Aid

The Solicitor-General (Sir Patrick Mayhew): I beg to move,
That the Legal Advice and Assistance (Prospective Cost) Regulations 1985 (S.I., 1985, No. 1840), dated 28th November 1985, a copy of which was laid before this House on 2nd December, be approved.
I understand that it will be for the convenience of the House if I deal at the same time with motion No. 5 on the Order Paper:
That an humble Address be presented to Her Majesty, praying that the Legal Advice and Assistance (Amendment) (No. 2) Regulations 1985 (S.I., 1985, No. 1879), dated 3rd December 1985, a copy of which was laid before this House on 5th December, be annulled.
The regulations are much more valuable than they are simple. To explain the affirmative resolution, I must say something about the other two associated sets of regulations. The subject of the affirmative resolution, the prospective cost regulations, alone does no more than establish an initial upper limit of £90 on the work a solicitor may undertake on his authority in some cases where people are arrested and held in custody. They must be taken together with the other two sets. The Legal Advice and Assistance (Amendment) (No. 2) Regulations 1985 make several important improvements for suspects in police stations. They make those improvements in the usual conditions for green form advice and assistance, and they provide most of the framework for the two-tier system that was announced last July. The process is completed by the Legal Advice at Police Stations (Remuneration) Regulations 1985, which also prescribe forms and rates of remuneration. Hardly less intregal is the Legal Aid (Duty Solicitor) Scheme 1985, in which the Law Society has made arrangements for a 24-hour duty solicitor scheme. All four documents form part of a complete system and are fully interdependent. They represent one of the most significant developments in legal services for years. For the first time, special arrangements will be made for legal advice at police stations.
The right to legal advice for suspects already exists in the judges rules, but they have not been fully satisfactory and will be withdrawn. The police have been under no obligation to inform suspects of their rights, and only the tiniest proportion of suspects seems to have known about them or chosen to exercise them. That is why the Philips Royal Commission recommended a clearer and safeguarded right. But it understood the possible resource implications of that and suggested that it should be confined to suspects who had been held for six hours or more.
When the Police and Criminal Evidence Act 1984 comes into force on 1 January next year, it will fundamentally change the present position. All those who were arrested will have a statutory right to advice. They must be informed of that right and how it might be exercised. They must sign their custody records to acknowledge that that has happened and to note their decision. Except in cases of urgency, the police may not interview further, once advice has been requested, until the client has seen a solicitor, if one is available.
The code of practice confers a right to advice for all those who are voluntarily helping the police. The code was approved by the House on 5 December. Both the commission's research and pilot studies conducted by the


Law Society suggest that about 20 per cent. of suspects will now seek legal advice. What is more, the tighter timetables that the 1984 Act imposes on the police by virtue of section 40, review of custody, mean that many of these requests will arise out of normal working hours.
The Act therefore includes powers for the Law Society to make arrangements for a 24-hour duty solicitor scheme. That will operate through the committees which already run duty solicitor schemes in magistrates courts. When a suspect is told of his rights, he will be told how to get a solicitor. If he opts for the duty solicitor, the police will telephone the commercial regional telephone service which has details of the duty solicitors in the region. The service will be responsible for finding a duty solicitor for the area and contacting him with details of the request. That should ensure that duty solicitors get to the police station within the timetables. The solicitors and others who under the duty solicitor's directions will work under the scheme will be selected for relevant experience and general ability to advise at police stations. The framework for all that is contained in the society's scheme.
Three factors have weighed in the preparation of the scheme. First, only about a third of suspects, on the basis of the society's pilot schemes, will ask for a duty solicitor. The others will ask for their own, and we have sought to avoid limiting freedom of choice. Secondly, we have had to make a number of improvements in the legal advice and assistance scheme—the green form scheme—to take account of the special circumstances at police stations. Thirdly, there is the need to secure value for money. The Lord Chancellor has had to consider the availability of Government finance, and all the competing claims upon it, and to ensure that the funds which are available are used effectively and without waste.
May I first take the two-tier provisions. Under the standard green form provision, a solicitor may undertake work to the value of £50 on his own authority without obtaining the permission of the legal aid committee, but if it appears likely that more than £50 will be required he must obtain a prior extension from the Law Society before proceeding. The new regulations therefore provide a new upper limit of £90 when a solicitor is advising a suspect who has been arrested in connection with a serious offence—an "arrestable offence" in the language of section 24 of the 1984 Act. That means, putting it broadly, where a sentence of imprisonment of five years or more can be imposed.
In such a case, a solicitor may need to give prolonged advice. He may also need to be present for a substantial period. The upper limit can accordingly be extended retrospectively where urgency is required in the interests of justice. But the Lord Chancellor is firmly of the view that it would not be right to make this exceptional provision for every case. For offences other than section 24 offences—the lower tier cases—the standard green form cost limit of £50 will apply, and it may not be exceeded.
On the basis of the society's pilot schemes, this amount should, very broadly, allow a solicitor to visit the suspect in the police station and provide the average period of advice that is required in cases of all kinds where average travelling costs apply. Of course, in the case of either tier it may be possible for the solicitor to give advice over the telephone. There are a number of further improvements to the usual green form conditions—

Mr. Alex Carlile: The hon. and learned Gentleman has just mentioned the provision of advice over the telephone. One can envisage many cases in which advice might be given over the telephone by a solicitor to a client in a police station. However, will the hon. and learned Gentleman assure the House that facilities will be made available in police stations to enable suspects to talk in complete confidence, and without supervision by police officers, to their solicitors? If they cannot be provided with that facility, it is quite useless for them to talk 10 their solicitors over the telephone.

The Solicitor-General: I am sure that it is desirable that suspects should be able to talk in confidence to their legal adviser. I shall draw the hon. and learned Gentleman's point to the attention of my noble and learned Friend the Lord Chancellor.
There are a number of further improvements to the usual green form conditions, and they are important. The green form means test and the contribution provisions will not apply; applications by telephone will be permitted; the society's prior approval is normally required if an application is taken direct from a child, but that will not be necessary here; and a case can be handed from a duty to an own solicitor or vice versa. Those important improvements apply to cases in either tier and whether a duty solicitor or the suspect's solicitor is requested.
I will not go into many details of the remuneration arrangements for police station work, which are contained in the regulations, but it may be helpful if I comment on the basic structure. A duty solicitor will be given a standby payment of £60 for 24 hours, or pro rata. Any work that he may do in that period will be paid for at scale rates under the regulations, but, however much he does, he will never get less than half the standby pay in addition.
He will be paid at the rate of £27 an hour, for all work, except that out of normal office hours, and that will be enhanced in upper tier cases by one third to £36 an hour. A flat fee of £10 is introduced for advising over the telephone, together with a charge of £1 for routine telephone calls—for example, to the telephone service or to establish contact with the client. Where necessary, accommodation costs will be met.
The provisions for own solicitors are more similar to the existing general green form arrangements. They will be paid at the rate of £27 an hour for giving advice and £17 an hour for travelling and waiting. The same telephone fees will be available. Both kinds of solicitors will receive travelling expenses to and from their client.
The expression ABWOR—assistance by way of representation—applies to many of our constituency cases. Both duty and own solicitors will be involved in advising and representing suspects in connection with hearings before magistrates' courts for warrants of further detention. Again, these are important improvements on the standard conditions for assistance by way of representation.
Legal representation will always be necessary and the usual requirement for prior approval of the representation by the society will not apply. Nor will the means test requirement apply, nor the contribution liability. The usual remuneration for this work will be paid, except that duty solicitors who do it out of usual office hours will be paid rates enhanced by one third.
These arrangements are a systematic and workable fulfilment of the Government's undertaking to provide an


effective right to legal advice, balanced against our need to bill the taxpayer only with what is necessary. But this is a new area and we must be ready to adjust the scheme if, in the light of experience, that seems necessary. The Lord Chancellor has undertaken to keep it under review. I believe that in no other country will such extensive rights for the individual be available, and I commend the regulations to the House.

Mr. Nicholas Brown: It is right that the House should debate the regulations and the Opposition prayer together. Indeed, it would have been difficult for us to have debated them separately because they inter-relate. The Solicitor-General helpfully took the House through that inter-relationship, and I shall not repeat much of what he said. I agreed with the emphasis that he placed on the importance of the new procedures that will be adopted at police stations.
Our objections are specific, and I would not like it to be thought that we objected to the 24-hour duty solicitor scheme as a whole. The regulations establish an initial limit of £90 on certain work which may be undertaken under the new 24-hour duty solicitor scheme, and separately there is established a limit of £50 on the amount of work that may be undertaken with volunteers, and by "volunteers" I mean people who are at police stations helping the police with their inquiries but who have not been arrested.
The 24-hour duty solicitor scheme had its origins in the Police and Criminal Evidence Act 1984. That Act took up some recommendations from the Philips commission. Whatever the Opposition's reservations to that Act, we strongly support the 24-hour duty solicitor scheme. Our prayer is directed solely at the capping of the amount of money which will be paid for certain categories of work. I appreciate that the Lord Chancellor has said that his mind is not closed on that issue. In that context I welcome the research that is to be undertaken by the Home Office into the functioning of the scheme and, in particular, into the different categories. The implication behind the Lord Chancellor's statement and the Home Office review is that the Government are willing to reconsider the issue on the basis of practical experience. I take comfort from what the Solicitor-General has said tonight on that.
As I said, our objections are solely to the establishment of ceilings on certain types of work. We are not objecting to the rates of payment and certainly not to the scheme itself. We have several specific anxieties. The first has already been touched on. The private telephone conversation with the solicitor which is envisaged in section 58 of the Act should be an administrative matter. The Solicitor-General said that he was sure that it is desirable. It is a bit more than desirable. I think that it is a legal right, although I am willing to be corrected if that is wrong.
I am sure that in a case such as drunken driving—an obvious and perhaps seasonal example—it is envisaged that advice will be given over the phone. I do not see why in the average drunken-driving case a solicitor should go to the police station. I am sure that a telephone call would be appropriate. But the right facilities should be provided for genuinely private conversations in police stations between the detained individual and his solicitor. I hope

that the Solicitor-General can say something more than that it is desirable. The House is entitled to know what arrangements are being made to ensure that that will be the case. I have not seen the inside of many police stations, but I suspect that many do not have facilities for members of the public to make private telephone calls, yet that is something to which they are entitled.
However, the main thrust of our objective concerns the two-tier arrangement and the anomalies to which it gives rise. In particular, a real conflict must be posed for a solicitor who is advising a volunteer. What advice has the Solicitor-General for the solicitor who is with a client helping the police with their inquiries in a police station on a complex matter when the £50 limit on the work allowed by the scheme has been reached? There are only a limited number of options. The solicitor could encourage the police to arrest his client so that he could continue to be paid, but that does not seem desirable. In many cases it will almost certainly not be in the client's best interests, in the interests of justice or even, taking the Solicitor-General's point, in the Treasury's interest.
Alternatively, the Solicitor-General could advise the solicitor to say that the time is up, the money has run out and that if he is not going to be paid he will go home. What advice would the Solicitor-General then give to a solicitor who was charged with professional misconduct or even sued for negligence? I know that most solicitors would not take that attitude. They would stay and see their professional duties through. But there is clearly a conflict because nobody likes to do work for which he will not be remunerated.
If the solicitor did go, what would happen if the police then introduced new points? Would it be possible for the detained individual to make another telephone call and perhaps call the solicitor out again after he had just arrived home or perhaps call another solicitor out? Alternatively to those pretty objectionable possibilities, the Solicitor-General could advise a solicitor to work on for no pay on the swings and roundabouts principle. In other words, the cost of doing that work for nothing would have to be borne by the solicitor's other work. That does not seem to me to be a fair or acceptable alternative.
I have had put to me the case of a solicitor who spent six and a half days with a client of no personal wealth who was helping the police in a fraud case. The client was not arrested. It was obviously not in his interest that he be arrested, nor was it in the police interest. The police interest was to get to the bottom of the case. Yet the solicitor involved, under these rules, would be paid only £50.
In many cases what is proposed here is more restrictive than what happens now. I am thinking in particular of cities such as Birmingham where the local branch of the Law Society operates a much praised voluntary 24-hour scheme. It fears that this will be destroyed and be replaced by something less effective.
In addition, there must be a fear that the most vulnerable people in our society—the mentally retarded, those who do not speak English very well, and young persons—may not be effectively advised under the present scheme. The Confait case is one that is always quoted in this context. The point is that volunteers, who were completely confused, were misled into making false confessions. There is surely at least a case for taking


volunteers in more serious cases out of the lower tier, and similarly to do the same for vulnerable categories of people such as the mentally deficient.
I do not always find myself in agreement with the Law Society in legal affairs debates, but I have never argued that it should not be consulted in matters of this kind. The Law Society has objected most strongly to me and to my hon. and learned Friend the Member for Aberavon (Mr. Morris) that the Lord Chancellor announced the two-tier basis of the arrangements in July 1985 without prior consultation with the Law Society. Given the emphasis that the Attorney-General put on consultation with the society during the course of the Adminstration of Justice Bill, I looked forward to hearing the Solicitor-General explain why the Law Society did not have to be consulted about these regulations.
There is widespread concern in the profession about the practical workings of the 24-hour scheme. In theory it is to be operative on 1 January 1986, but I have to put it to the Solicitor-General and to seek a specific assurance that the scheme will be operative in the north London area. The Home Secretary promised, on the Second Reading of the Police and Criminal Evidence Bill, that the Government were going to put public money where their mouth was. We are asking for neither the money nor the mouth, although the former Home Secretary often encouraged Opposition Members to do just that.
It is our contention that a modest reappraisal of the regulations would not only facilitate the better administration of justice but would specifically lead to a more effective use of resources, because the effective intervention of a solicitor at the early stage of an inquiry should assist in reducing the acquittal rate.
I conclude by quoting from the introduction to the guidelines for solicitors prepared by the Law Society's criminal law committee, entitled "Advising a suspect in the police station". In the section headed "Serving the public interest" it says:
A solicitor's presence and advice will assist the truly innocent to give an account of their activities under suspicion and help to relieve them of pressures which can induce false confessions and cause miscarriages of justice. A solicitor will advise the guilty of the weight of evidence against them and, if they be truly guilty, of the substantial mitigation advantages of admitting guilt at the earliest opportunity, of assisting the recovery of stolen property, and of clearing up outstanding inquiries. The presence of a solicitor in the police station means that justice is better secured for the individual; it also leads to savings in police, court and judicial time so that quicker and more economical justice is secured for the community at large.

Mr. Alex Carlile: The introduction of a national duty solicitor scheme is very welcome. However, unfortunately it is under-funded. The Solicitor-General, quite apart from his physiological dissimilarity to Scrooge, has only just escaped summoning up the ghost of Christmas past by his undertaking that the scheme will be kept under constant review. I greatly welcome that observation, which he made a little earlier.
There are going to be clear anomalies because of the two-tier nature of the scheme. The fact that a person is helping with inquiries does not mean that he is not in serious trouble. People frequently help the police with their inquiries, as the quaint phrase goes, then find themselves being charged with murder, serious fraud, arson and so on.
In my view, it is clearly wrong that the solicitor who is asked to advise a person helping with inquiries under the duty solicitor scheme should be able to claim only at the lower rate. Even the higher rate is inadequate because it is intended to include the travelling time taken by solicitors who often live some distance from the police station.
One of the problems that police forces, particularly in the larger cities, have sometimes experienced is that when solicitors have been asked to come to the police station in the night it is in fact only the shabbier clerks of the dingier solicitors who have been prepared and detailed to do it. Welcome though the scheme is in general terms, I fear that the financial limits imposed will lead to the shabbiest clerks of the dingiest solicitors continuing to go out in some areas.
The scheme as funded will depend for its success not upon reasonable remuneration to the solicitors, because that is not available, but upon the good will of solicitors and the interest which solicitors around the country have already shown in duty solicitor schemes. We have already heard the voluntary scheme in Birmingham mentioned. There is a real fear that not only in Birmingham but in Portsmouth, Southampton and other less well known and smaller places existing voluntary schemes will be replaced by something worse as a result of these regulations.
In the Second Reading debate on the Police and Criminal Evidence Act 1984 the then Home Secretary said that arrangements were needed for solicitors to be available at, all times when legal advice might be sought. That was welcome, but I fear that the Government have not completely fulfilled their promise to put public money where their mouth is. They have put some money in, but the mouth still has a substantial void.
I am particularly concerned about telephone advice. As I said earlier in an intervention, there will be many cases in which it would be unnecessary for a solicitor to turn out from his home in the middle of the night and attend a police station to give advice. However, if the telephone advice scheme is to be truly effective there must be an assurance that in all police stations facilities will be provided for private calls to be made by suspects to their solicitors.
Above all, the practice of eavesdropping on those calls must not be adopted. We know that in the past, sometimes legitimately, police officers have eavesdropped on cell conversations between prisoners. That has often provided proper and powerful evidence in the case against those prisoners when they go to trial. It is very much to be hoped that the police will be discouraged from eavesdropping on telephone calls because there is a danger that, even if the eavesdropping does not come out in court, conversations between suspects and their solicitors, which should have the stamp of confidence, would become a subterfuge for obtaining evidence about the matter under investigation.

The Solicitor-General: I am grateful to the hon. Member for Newcastle upon Tyne, East (Mr. Brown) and the hon. and learned Member for Montgomery (Mr. Carlile). They lost nothing in content or cogency by being succinct. The hon. Member for Newcastle upon Tyne, East began with a welcome for the scheme. I entirely understand the reasoning that lies behind the prayer. The Opposition welcome a duty solicitor scheme and their anxiety relates to the various matters that he mentioned.
Privacy in a telephone conversation in which a solicitor is giving advice is desirable. I am reminded that section 58(1) of the Police and Criminal Evidence Act 1984 provides that a suspect arrested and held in custody
shall be entitled, if he so requests, to consult a solicitor privately at any time.
It is therefore important that there should be no eavesdropping. That was mentioned by the hon. and learned Member for Montgomery. Anxiety about that matter should not appear to be dismissed. My noble and learned Friend the Lord Chancellor is aware of it. Solicitors are already advising clients satisfactorily over the telephone. Nothing will change with the regulations except the number of occasions upon which that will happen. The right to consult a solicitor privately is for the first time enshrined in a statute and eavesdropping would be a contravention of that right. I am pleased that the matter has been raised.
Vis-a-vis the two-tier system, the hon. Member for Newcastle upon Tyne, East asked what will happen when the £50 limit in lower tier cases is reached. A solicitor's duties have always been limited by the extent to which he is retained. There is no question of his being in breach of professional duty if he withdraws when the limit is reached. Naturally, a solicitor will wish to do his best. In a case such as that which has been described, a solicitor will know the time in which he has to seek his instructions and give his advice.
In the case of someone who has not been arrested and who is at the police station as a volunteer, the solicitor can always put the matter to the test by inviting his client to say that he wishes to leave the police station. That then puts the police to their election as to whether to arrest.
I was asked whether volunteers should be taken out of the lower tier. There are some misunderstandings about the position of a volunteer in those circumstances. He has not been arrested. Sometimes it is not clear whether the offence of which he is suspected falls within the upper or the lower tier. I do not believe that the advantage of the provisions under the regulations relating to someone arrested for an offence that comes within the upper tier are necessary in respect of a volunteer.
There is a clear distinction between a case which has progressed as far as an arrest and one which has not. There is no need for upper tier advice. It is often wholly unclear in such cases whether an offence is involved and, if so, what. The vital element which makes it clear which tier is involved is therefore missing.
The undertaking of my noble and learned Friend the Lord Chancellor to keep the working of the scheme under review is relevant to that point, and we shall see how it develops. No one is supposing that the present form shall, in every instance, be regarded as having been set in concrete, or anything like it.
As to the question of consultation, the scale of the problem was not known until we had had the research on the pilot schemes carried out by the Law Society over last winter in Birmingham and Kettering. That became available towards the end of the first quarter of this year.

Although the Lord Chancellor announced the decision in July, we have been prepared to listen sympathetically to further proposals from the Law Society, and have been greatly helped by its suggestions.
I was asked to give an assurance that the scheme would be in operation in north London on 1 January. If the regulations are approved, the framework for the scheme will be completed. The telephone service will be ready and the Law Society has briefed the committees throughout England and Wales on the steps that they need to take. Now we must look to the profession itself—that is where success will lie—to use the framework provided.
I understand that the first signs are that the profession is showing itself willing to join the rotas. I very much hope that that will be the case. It would be a very great shame, especially in the light of the Lord Chancellor's assurance, if solicitors—especially with their honourable record in many voluntary schemes—were to hold back from joining in the rotas. I am confident that that will not happen.
The hon. and learned Gentleman said that the scheme was under-funded. That is all very well, but the original estimate was £6 million. That appears sadly to have been rather low. The Law Society now estimates the costs of the scheme to be £23 million in a year, which is by no means chicken feed. One could always say that we could spend more, and indeed we could. But we must ensure that the taxpayer is not given a bill for more than is necessary. We must see how we get on.
I do not believe that it will be the shabbiest clerks from the dingiest solicitors who take part in the scheme. That does not do justice to the way in which the profession deals with its responsibilities under the voluntary schemes. I do not believe that that is the way that it will happen under the present scheme.
I think that I have dealt with the question of confidentiality and with the other points raised during the debate.
This is really not a scheme and these are not regulations that put one in mind of "A Christmas Carol". I would refer to them as "Great Expectations".

Question put and agreed to.
Resolved,
That the Legal Advice and Assistance (Prospective Cost) Regulations 1985 (S.I. , 1985, No. 1840), dated 28th November 1985, a copy of which was laid before this House on 2nd December, be approved.

STATUTORY INSTRUMENTS, &c.

Motion made, and Question put forthwith pursuant to Standing Order No. 79(5) (Standing Committees on Statutory Instruments, &amp;c.)

TERMS AND CONDITIONS OF EMPLOYMENT

That the draft Employment Protection (Variation of Limits) Order 1985, which was laid before this House on 2nd December, be approved.

That the draft Unfair Dismissal (Increase of Limits of Basic and Special Awards) Order 1985, which was laid before this House on 2nd December, be approved.—[Mr. Maude.]

Question agreed to.

PETITIONS

Sunday Trading

Mr. David Amess: I beg to ask leave to present a petition on behalf of my hon. Friend the Member for York (Mr. Gregory). My hon. Friend organised the petition together with ministers of all the York churches—Roman Catholic, Anglican and Non-Conformist. It has been supported by 3,263 of my hon. Friend's constituents, and gathered together over just three Sundays. After the Christmas recess, more petitions on behalf of my hon. Friend will be presented.
While accepting that there are certain restrictions regarding Sunday trading that should be clarified, the overwhelming view in York is that the essentials of life, such as urgent medical prescriptions and mobility through petrol sales, should continue, but that, basically, Sunday should be retained as a day of family life set apart from the rest of the week, and including worship. Together with my hon. Friend the Member for Welwyn Hatfield (Mr. Murphy), I support the sentiments of the petition.

The petition reads:
To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled.
The humble petition of Mr. Conal Gregory MP and the citizens of York, sheweth that whilst acknowledging the need for the removal of the present anomalies in the Sunday Trading Laws, we urge that Sunday remain a day of worship, rest and relaxation for the benefit of family and community life.
Wherefore your Petitioners pray that your Honourable House reject the need for any other deregulation.
And your Petitioners as in duty bound will ever pray, etc.
To lie upon the Table.

Dog Fighting

Mr. Conal Gregory: I have the honour to present to the House a petition on dog fighting. Dog fighting rightly raises real concern, and my petitioners seek to show that this cruel activity is inadequately discouraged under statute law. The petition was organised by Miss H. E. Redshaw of York and carries 47 names and is addressed to
The Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled. The humble petitioners sheweth:

(1) that under the protection of the Animals Act 1911. the penalties for causing or procuring animals to fight are not commensurate with the barbarity of such illegal cruelty.
(2) that there is no restriction on the importation, sale or advertising of dogs favoured by those involved in dog fighting.

Wherefore your Petitioners pray that your Honourable House will take all such measures as lie within their power specifically

(1) to substantially increase the penalties for those convicted of causing, procuring or assisting the fighting or baiting or any animal. (Protection of Animals Act 1911, section 1(c).
(2) to introduce mandatory disqualifications of ownership and custody of any animal for those convicted of such offences.
(3) to ban the importation, sale and advertising of Pit Bull Terriers
(4) to prohibit the advertising of any Bull Dog's fighting qualities', 'gameness' or other descriptions which might attract dogfighting enthusiasts.

To lie upon the Table.

Greenbelt (Hertfordshire)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Maude.]

Mr. Richard Page: I thank my hon. Friend the Under-Secretary of State for coming to answer an issue that has generated a great deal of enthusiasm, heat and anger in my constituency and in the other Hertfordshire constituencies. I would like my hon. Friend to imagine that I have beside me, as I know I have in spirit, all the other Hertfordshire Members. I am pleased to see a more physical manifestation in the shape of my hon. Friend the Member for Welwyn Hatfield (Mr. Murphy).
The subject of the debate is of concern not only to hon. Members for Hertfordshire, as other hon. Members have approached me and offered their support. Councils from outside Hertfordshire have written to ask me to support their interests over the green belt.
I do not intend to deal with the history and justifications behind the creation of the green belt. Regular consultations take place as part of that process, and in January 1985, the Hertfordshire structure plan review consultation document was published. The document was generally well received. There was strong opposition from the housing and construction industry, which believed that the review of the county structure plan needed to make provision for at least a further 12,500 to 22,000 units.
For this and a variety of other reasons, it was felt that further consultation should take place, and that took place in April of this year, on the new development options. It concerned incremental and major growth, all of which involved taking considerable acres from the green belt for housing development. The people of Hertfordshire were asked for their views on the building of about 72,500 homes in the county before 1996, an increase of 20,000 on the figure that was put forward earlier in the year. There has been a high level of response to those consultations and to date replies have been received from 336 groups and 1,072 individuals. All but about 50 have been against the proposal. Of the 50 who have written in in support, most have expressed qualified support.
In addition, the individual Hertfordshire Members have received representations directly themselves. I have been inundated by concerns and queries from my constituents, especially from those living in the village of Bovingdon, which is in the heart of my constituency. I understand from the consultation document that there is the possibility of about 700 homes being constructed there. If the proposal were implemented, it would destroy the environment and the character of the village. In the end, I had to beg my constituents to stop writing to me on the issue, especially from Bovingdon. I contacted the parish council and asked it to tell everybody that I had the message and that I would be supporting what they were saying, which was that 700 homes should not come into the area.
In addition, I consulted the two district councils, the borough of Dacorum, and Three Rivers district council. The Dacorum council resolved that it was not satisfied that the levels of dwelling provision contained in the new issue consultation document had been adequately justified and requested

the county council to make a thorough examination of the Department of the Environment and the SERplan household forecasts, taking into account the importance of maintaining inner city policies.
That it would be opposed to further development in the green belt as currently defined and would seek to maintain a policy of containing developments within urban areas.
Finally, to inform the county council that the location of any further development should be established by the borough council through the local planning process.
That was a clear-cut and unequivocal reply to the new consultation document.
Three Rivers district council was concerned to resist the efforts to nibble at the green belt and was worried about pressures that might flow from circular 14/85, headed "The Green Belt", and circular 15/84, headed "Land for Housing". There are obvious conflicts in the advice that is given in the two circulars. Three Rivers council is concerned especially about paragraph 4 of circular 14/85. I shall not go into the paragraph in detail, but it seems to avoid the realities. It points the way to the development of the white line, which in turn will bring it hard up against the urban edge, which in turn will produce greater pressures to re-draw the green belt. The routeing of the M25 through my constituency will inevitably create the temptation to make it the natural limit of permissible development. That is of concern.
I hope that the House will excuse the pun, but I do not believe that the green belt should be set in concrete for ever. There must be a little flexibility. Allowance should be made for building lines to be straightened and for sensible and regional density infillings, but not to the level suggested. It is possible that 2,000 of the 20,000 homes for Hertfordshire will be located in Dacorum. People chose to live in south-west Hertfordshire because of the environment. Many people say that more development should be permitted to allow local people the chance of getting a home. Unless there was a vast increase in planning permission, the cost of land would not decrease substantially to allow that wish to be fulfilled. I do not believe that I have been elected by my constituents to see my constituency covered in tarmac and concrete.
I do not blame those in the housing and construction industry for seeking permission to build more houses. They have a business to run. Of course it is easier to build on a greenfield site. In the past few months, we have heard much about the state of our inner cities. We have had the panoply of the Church of England putting pressure on us to do something about the inner cities. In anything to do with development, it must be the duty of authorities to restore, renovate and rebuild the inner cities rather than develop the greenfield sites. I point as a hopeful sign to the redevelopments on the docklands. We can build on that example.
I return to the question of flexibility and the idea that there can be some tolerance around the edge of the green belt. I have a suggestion. I know that it is not new and I put it forward without having consulted either of my two local councils, so I might be out of order with them. I suggest that there could be merit in considering the idea that, while housing development should be concentrated in the towns, the rate of housing development in rural areas should not be allowed to exceed the rate of 0·5 per cent. per annum of existing housing stock. This could be administered through and by local district councils. I know that this was not approved in 1979 by the Secretary of State


because of representations by district councils on that structure plan, but I believe that it would give flexibility to local councils and might merit reconsideration.
I understand that the results of this consultation process will be considered on 13 January by the county planning committee, which will look at a draft structure plan to put to the Secretary of State. I sincerely hope that the county will firmly reject the idea of adding another 20,000 homes to the original January 1985 plan.
I should like my hon. Friend the Under-Secretary of State to confirm the Government's support for the green belt, to enable me to reassure my constituents. I should like him also to reassure my constituents in Bovington that they will not see 700 houses springing up beside their homes. I should like to take back some reassurance to my two local councils, so that they know that the Government are firmly behind them when planning matters are considered and large inroads into the green belt are proposed.

The Parliamentary Under-Secretary of State for the Environment (Mr. Richard Tracey): May I first congratulate my hon. Friend the Member for Hertfordshire, South-West (Mr. Page) on tabling this motion on the Adjournment debate. I also welcome the attendance of my hon. Friend the Member for Welwyn Hatfield (Mr. Murphy). There has been a good deal of concern about pressures for development and the future of the green belt in south-west Hertfordshire and, indeed, in other areas. I welcome the opporutnity to set out the Government's position. As a Member of Parliament with some green belt in my constituency in Chessington, Surrey, I am pleased to be able to speak in the debate.
Green belt policy in England has been one of the most successful planning initiatives since the war. Unlike some other planning ideas, it has not been affected by changes of fashion which might have sought to re-interpret its objectives and the means of achieving them. Successive Governments have continued the original policies in essentially the same form.
The policy on green belts was first set out in a circular in 1955, and it remains the same today. The importance which the Government attach to green belt has been confirmed in several recent circulars. The essential characteristic of green belts is their permanence. The Government's policies are aimed at defining detailed long-term boundaries so that they can be fully protected from unsuitable development.
This Government have a particularly good record in moving towards this objective. An area of 4·5 million acres, which is roughly the size of Wales, now lies within the green belts around London and our other big cities. In 1979, when we came to power, the green belt picture was patchy, to say the least. It depended upon the application of a hotch potch of old development plans. Under half of it had been fully approved. Since then, in just six years—and it is a shame that there are no Opposition Members present to hear this—all the rest of the green belt land has been formally approved by this Government.
The green belt around London now extends to 1·2 million acres, an area greater than the whole of Hampshire. There is a green belt around Nottingham and Derby of over 200,000 acres. An extension around Sheffield and other south Yorkshire towns has added 800,000 acres. The west Midlands green belt now covers

650,000 acres and the Tyne and Wear green belt has been more than doubled to 200,000 acres. All this represents significant progress, for which the local authorities concerned can share the credit.
Within green belts, as elsewhere, each planning application has to be decided on its merits, but there is a general presumption against inappropriate development. My hon. Friend illustrated that well in his speech. Inside a green belt approval should not be given, except in very special cirumstances, for the construction of new buildings or for the change of use of existing buildings other than for a very limited range of purposes. We would all accept that clearly some development does take place in green belts. They are not intended to be museums, so for example development for agricultural or recreational purposes may be appropriate and, as my hon. Friend pointed out, in towns and villages within green belts some strictly limited infilling or rounding off may be acceptable.
The Government's concern to protect green belt land is part of a wider policy of protecting and enhancing the environment, including national parks, areas of outstanding natural beauty and conservation areas. But we must also ensure that there is an adequate supply of land for new development, for industry, for housing and for other needs. Our future prosperity and quality of life depends as much on sustaining a strong economy as it does on protecting our heritage. These objectives are not incompatible, but they do require careful planning and sensible development control.
With this in mind, the Department's circular on green belts issued in July last year reaffirmed our commitment to the long-term protection of green belts and gave advice to local planning authorities on defining green belt boundaries. We want to ensure that detailed boundaries are clearly defined, so that people can see exactly what areas are included in the green belt. Once those boundaries have been defined, we are anxious that they should be altered only in exceptional circumstances.
The Government's aim is to ensure that as much new development as possible takes place within existing urban areas. I give this assurance to my hon. Friends. We have, for example, asked local authorities to ensure that full and effective use is made of land within urban areas for housing. In some cases, good housing can be provided by converting or improving existing buildings without the need for any new land. There is also scope for building on neglected, unused or derelict land. We have also reminded local authorities that full use should be made of potential sites and existing premises in urban areas for industry. This emphasis on the full use of urban land can help to promote economic and social regeneration in older urban areas. It can also assist the preservation of agricultural land and conservation of the countryside and maximise the use of existing infrastructure.
We should not be too pessimistic about the scope for meeting present housebuilding requirements from land in built-up areas. Preliminary analysis of recent data from the ordnance survey suggests that nearly half the land being used for housebuilding is coming from previously developed land, including land already in residential use, or from other vacant land in built-up areas.
My hon. Friend suggested that housebuilders should have their attention directed to the city centres. He will be pleased to hear that only last week my right hon. Friend the Secretary of State encouraged housebuilders to concentrate more on the development of small infill sites


which were popular with clients and were more acceptable to those already living in the area. He welcomed the House Builders Federation's announcement of an impartial investigation, to identify ways of overcoming the obstacles to housebuilding in the cities.
The Government have developed a range of policies to encourage development in urban areas. Since 1979, some £1,900 million has been channelled through the urban programme into thousands of projects intended to encourage enterprise, improve the environment and pilot new ways of tapping voluntary effort and meeting the needs of ethnic minority communities. More than £300 million in new private sector investment has been attracted into the inner cities through urban development grant. We have introduced land registers to identify areas of land in public ownership that could be put to better use.
Earlier this year, city action teams were introduced in the major inner city conurbations to pull together Government programmes, which are aimed at stimulating local economies. They look after programmes worth £270 million a year. Some 25 enterprise zones are now operating in the United Kingdom. They have created and safeguarded thousands of jobs, largely by easing restriction on business development.
Our derelict land programme is particularly important. The use of derelict land grant to create development sites out of run-down urban land helps to stimulate economic activity and to ease the pressure to find building land in the green belt. The Government have greatly increased the resources available for reclamation through derelict land grant. In 1979–80 this stood at £23 million. This year it was initially £76 million. We have just increased it to £82 million.
We have also changed the way in which this money is spent. The main priority for derelict land grant is to improve our towns and cities, by opening up new areas of attractive. Clean modern development, making them better places in which to live and work, and more attractive to private investment and private housing. This is how to create jobs and prosperity. We have increased more than tenfold the amount of grant going to inner cities and have encouraged the reclamation of land for housing, commerce and industry. Six years ago only 6 per cent. of this reclaimed land was used for housing or commerce. Now it is 60 per cent.
My hon. Friend is concerned that large-scale significant housing development may be permitted in the green belt in south-west Hertfordshire. I understand his concern. He has in mind proposals for additional housing provision included in a consultation document issued in the autumn as part of Hertfordshire county council's draft structure plan review. This is a purely consultative document produced by the county council. It has made it clear that

it is in no way committed either to the principle of accommodating more housing growth in Hertfordshire, or to any of the individual proposals in the document.
When Hertfordshire county council has considered all the responses to its consultation, it will be for the council to decide what to include in the final proposals that it intends to submit to my right hon. Friend the Secretary of State for his approval early next year. When its proposals are submitted, there will be an opportunity for objections to be made to the Secretary of State. Before reaching his decision on the proposals, the Secretary of State will take into account all the representations received, and may decide to hold an examination in public. I can assure the House and my hon. Friend that all representations received will be carefully considered before any decision is reached on the review.
My hon. Friend referred in his excellent speech to proposals for development at Bovingdon. I assume that the proposal to which he refers is one on which the public have recently been consulted as part of the structure plan review. I do not know whether this proposal will form part of the county council's final proposals to the Secretary of State. If it does, it will of course be carefully considered by my right hon. Friend. At the time proposals are submitted to the Secretary of State my hon. Friend will have an opportunity to make representations to my right hon. Friend about the county council's proposed alterations to the structure plan.
My hon. Friend has criticised those who say that, if there were more residential developments house prices would fall and, consequently, local people would be able to afford them and to remain in the area. This is a difficult issue. House prices are determined by a number of factors of which land availability is only one. I have no reason to believe that an increase in housebuilding in Hertfordshire would necessarily lead to a fall in house prices. If prices were to fall in any area, there could be no guarantee that the houses would be bought by local people.
I was interested to hear my hon. Friend's suggestion that local authorities should be given a tolerance—I believe that was how he described it—which would allow them to develop 0·5 per cent. of the green belt each year if they wished. Our present policy on the control of development in the green belt allows local authorities the proper flexibility, which is preferable to the application of more rigid rules.
As I said at the beginning of my speech, I am grateful for this opportunity to spell out in some detail the Government's commitment to the green belt. As I said, I have some green belt land in my constituency. I hope that I have reassured my hon. Friend on the matter before he starts his Christmas recess.

Question put and agreed to.
Adjourned accordingly at half-past Ten o'clock.